Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

EDINBURGH CORPORATION ORDER CONFIRMATION (NO. 2) BILL

Read the Third time and passed.

CORNWALL COUNTY COUNCIL BILL [Lords]

Ordered,
That the Cornwall County Council Bill [Lords] be recommitted to the former Committee in respect of Clause 65 (Application of Act of 1963 to certain self-employed persons).—[The Deputy Chairman of Ways and Means.]

Oral Answers to Questions — ENVIRONMENT

Listed Buildings, Monuments and Trees (Unauthorised Removal)

Mr. Hardy: asked the Secretary of State for the Environment how many listed buildings, ancient monuments and trees, protected by preservation order or planning condition, have been removed without official approval or permission during the last six months.

The Secretary of State for the Environment (Mr. Peter Walker): No ancient monuments protected by the Ancient Monuments Acts have been removed without official approval. The figures relating to ancient monuments protected by planning conditions, listed buildings and trees are not available in my Department.

Mr. Hardy: I appreciate the difficulty of obtaining the figures, but would not

the right hon. Gentleman agree that there have been many reports in recent months of features of importance and consequence being demolished or removed? Would he not also agree that there seems to be a growing attitude on the part of some developers that if there is a feature of some importance the best course is to demolish it first and apologise later? Will he look at the matter more seriously?

Mr. Walker: We have a good system of emergency listing under which, in one quarter, 700 buildings threatened with disruption were speedily listed. There is a good procedure here, but if I find loopholes that need to be filled I shall take the appropriate action.

Mr. Selwyn Gummer: Would not my right hon. Friend agree that it would be much better if, instead of this emergency listing, we moved the need for planning permission back so that it had to be requested before demolition? If that were done, it would not be necessary to have people rushing round doing emergency listing.

Mr. Walker: This is a matter of considerable complication. Such a measure would result in massive additional work, which would serve no real purpose.

Housing Subsidies

Mr. Skinner: asked the Secretary of State for the Environment whether he has now completed his consultations with the local authority associations regarding housing subsidy charges; and if he will make a statement.

Mr. Meacher: asked the Secretary of State for the Environment whether he can now give a precise indication of when he expects to conclude his consultations with local authorities, concerning his proposals to refashion housing subsidies.

The Minister for Housing and Construction (Mr. Julian Amery): I will report to the House as soon as possible.

Mr. Skinner: Is the right hon. Gentleman aware that when the consultations are finally over the implementation of the Act will be against the background of massive Labour majorities in most towns and cities? Does the right hon. Gentleman appreciate that in such a situation some of these authorities—I hope


many of them—will use every means at their disposal to avoid implementing a policy which means doubling and trebling rents by his Tory Government? In that kind of situation, can we expect the right hon. Gentleman to restrict the freedom of local action?

Mr. Amery: I am sure that I can count on the co-operation of all local authorities, of whatever political colour, to implement a reform of housing finance which the Labour Party, had it been reelected, would have undertaken.

Mr. Allason: Does my right hon. Friend find it likely that Labour councils would object to a fair rent scheme?

Mr. Amery: No, Sir. I find it difficult to think that they would object to a fair rent scheme, since the fair rent concept was introduced by a distinguished Member on the benches opposite. Nor do I think they would resent a scheme which would give added resources for slum clearance.

Mr. Crosland: I think we should clear this up. Is the right hon. Gentleman aware that in no circumstances would a Labour Government, if re-elected, have adopted the principle of fair rents in the public sector since, as the Prices and Incomes Board and many other bodies have made clear, there is no logical analogy between the private rented sector and the public rented sector? Will the right hon. Gentleman take my hon. Friend's question about' the date of announcement more seriously because, if as is rumoured, he proposes to force local authorities to raise rents under the new scheme in April next year, it is becoming a matter of the greatest urgency that they should know where they stand?

Mr. Amery: I agree with the right hon. Gentleman about the importance of an early statement. I am interested to hear that had his party been returned to office it would not have proceeded to adopt fair rents. It opens up interesting speculation about what it would have done.

Thomas Cook and Sons

Mr. William Hamilton: asked the Secretary of State for the Environment what is the up-to-date valuation of the freehold properties of Thomas Cook and Sons; and whether he can now state when

the proposed Bill for their disposal will be introduced.

The Minister for Transport Industries (Mr. John Peyton): I have written to the hon. Member about property valuation. On timing, I have nothing to add to the reply given to my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) on 16th June.—[Vol. 819, c. 439.]

Mr. Hamilton: Does the right hon. Gentleman recognise that the Transport Holding Company, which he said is handling the sale, is to issue a statement to prospective buyers? Will he give an assurance that the statement will be available to Members of this House and that this business will not be sold to any organisation which contributed to Tory Party funds at the General Election?

Mr. Peyton: Of course I will gladly give the undertaking asked for in the first part of the question about making any statement on this subject available to Members of Parliament. As for the last part of the question, all I can say is that the hon. Gentleman has managed to contribute his own unique blend of suspicion and self-righteousness, which is wholly unjustified.

Local Planning and Development

Mr. Tilney: asked the Secretary of State for the Environment what action he has taken to urge local authorities to combine physical planning and development of the environment with other services such as nursery schools, day nurseries and community centres.

Mr. Peter Walker: Current opportunities such as those presented by reorganisation, the preparation of structure plans and the initiatives taken to explore new forms of management are all tending to encourage local authorities to adopt the approach my hon. Friend favours. I intend to foster such developments.

Mr. Tilney: Has my right hon. Friend seen the Shelter Neighbourhood project in Liverpool? Does he not agree that there is much to be said for bringing the community spirit to inner urban areas and satellite cities?

Mr. Walker: I have visited the Shelter scheme in Liverpool on several occasions.


I think it has a great deal to offer, and I have encouraged other local authorities to go and examine the progress being made there.

Green Belt

Mr. Dykes: asked the Secretary of State for the Environment whether he intends to use the interim protection measure for green belt land in areas other than those already announced for Hertfordshire, Kent and Surrey.

The Minister for Local Government and Development (Mr. Graham Page): It is my general policy to safeguard all green bell proposals pending final decisions in the context of regional strategies.

Mr. Dykes: While I welcome my hon. Friend's interim protection device—and this has been widely welcomed outside the House—may I ask him whether he recognises that there is a particular problem in respect of those threshold areas of green belt land which give on to existing developed land? I am thinking also of the metropolitan area green belt land, particularly in Middlesex and my constituency. Does he recognise the need for a special directive to local authorities making clear that this green belt land should be sacrosanct, too? Secondly, may I ask when we can expect the final definitive decisions on the overall green belt proposals?

Mr. Page: The last part of my hon. Friend's question is well related to the first. The metropolitan area green belt proposals will be protected under these interim provisions, but the question of whether and when we shall receive final decisions is related to the preparation of the regional strategies and within them the preparation of structure plans under the 1968 Act. I am encouraging local planning authorities to prepare structure plans as soon as possible for confirmation by the Secretary of State. Green belt will be shown in those plans, for approval and confirmation by my right hon. Friend. I do not preclude the approval and confirmation of further areas of proposed green belt in advance of structure plans where this is clearly justified.

Mr. Freeson: While fully supporting the general intentions with regard to green belt policy, may I ask the hon.

Gentleman to take care not to encourage any ideas of preventing Inner London boroughs which have grave housing needs from purchasing or having made available to them non-green belt land in such areas as Harrow to assist with London's housing problem?

Mr. Page: We have to balance the housing requirements with the green belt policy. I do not think there is great difficulty in that. The local planning authorities are bringing forward land for housing development which is not affected by green belt policies.

Rivers (Effluent Discharge)

Mr. Arthur Jones: asked the Secretary of State for the Environment what procedures exist for consultation between planning and river authorities, regarding the existence and likely growth of effluent discharge into river courses, having regard to the increasing demand for water arising during the remainder of this century from the implementation of existing development plans.

Mr. Peter Walker: There are well established arrangements for consultations on development plans and development control, but I have come to the conclusion that there are not sufficient, and that a more formal basis for consultation is, however, needed for development likely to cause pollution; and I am discussing the form that this should take with the associations of local authorities and river authorities.

Mr. Jones: I am grateful to my right hon. Friend for that reply. Are we to have a White Paper on the whole question of water resources generally and, if so, when is it likely to appear?

Mr. Walker: There will almost certainly be a White Paper on water resources, but I cannot give a definite date for its appearance.

Mr. Crawshaw: I believe that the right hon. Gentleman is visiting Liverpool in the immediate future, when he will discuss this problem. Will he be sure to read a recent report which seems to suggest that such is the volume of effluent flowing into the river, and such is the projected inflow, that not only will the river become hazardous but health in the vicinity will be endangered?

Mr. Walker: I am very much in favour of adopting controls and methods that will from year to year from now on ensure that our rivers are cleaned up.

Mr. Scott-Hopkins: Is it not absolutely monstrous that my right hon. Friend has forced the Trent River Authority to lower its standards of acceptable effluent because of the premature closing of the Yardley, Birmingham, sewerage works? Will he take immediate action to rectify this?

Mr. Walker: That is an interesting point, but I know that generally the pollution of the River Trent is improving substantially.

Mr. Blenkinsop: Does the right hon. Gentleman not feel that the action he needs to take is on the lines recommended in the Jeger Report on sewage disposal, which really gives us the answer to the future?

Mr. Walker: I certainly look upon that as an important report. We shall soon be publishing our comments on the Jeger Report.

Building Land

Mr. Evelyn King: asked the Secretary of State for the Environment how many acres of land has been released for building purposes by county planning authorities in the counties of Hampshire, Dorset, Cornwall and Wiltshire since the issue of the Ministry's circular on this subject; and how much was released by the same counties in a comparable period in the previous year.

Mr. Graham Page: Statistics in the form requested are not available. I suggest that my hon. Friend asks the local authorities concerned.

Mr. King: Does my hon. Friend accept that the price of land, and, therefore, the price of housing units, depends very largely on the rate at which and is released? Is he satisfied with the progress being made?

Mr. Page: Yes. I have not been able to assess the effect of Circular 10/70, in which we asked local planning authorities to release as much land as possible, but I am confident that by our policy we are achieving more harmonious cooperation than the Opposition did in attempting to use the Land Commission.

Driving Tests (Appointments)

Mr. Normanton: asked the Secretary of State for the Environment whether he will now reconsider amending the Motor Vehicles (Driving Licences) Regulations, 1970, made under Section 25 of the Road Traffic Act, 1962, to allow discretion to be exercised by traffic area authorities administering the driving test appointment procedure, particularly where appointments had to be cancelled for reasons outside the control of the applicant.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths): No, Sir. My right hon. Friend has no power to do so.

Mr. Normanton: Will my hon. Friend consider either taking powers or at least giving some general directions to the authorities to deal with cases where applicants for a driving licence, through unfortunate circumstances such as sickness, duly certified, are faced with a penalty through having to pay for but not receive the test?

Mr. Griffiths: We take into account exceptional circumstances where applicants are not able to attend. Obviously, the cost of the administration of the scheme has to be borne by all the people and if too many exceptions were made the only result would be higher costs for the great majority.

Shops (Change of Use)

Mr. Worsley: asked the Secretary of State for the Environment whether he will amend the Use Classes Order so that planning permission would be required for a change of use from a shop to a restaurant or cafe.

Mr. Graham Page: I am considering this suggestion as part of a review of the Town and Country Planning Use Classes Order, 1963, but I am not yet in a position to announce any final decision.

Mr. Worsley: Is my hon. Friend aware that discussion of this matter has been going on for years, since I first raised it with the previous Government? Does he not think it is time that discussion ended and decisions were taken?

Mr. Page: It may have been going on for years with the previous Government.


I initiated discussions with the local authority associations on this. I have received their replies, which are now being carefully considered.

Mr. Ashton: Is the hon. Gentleman aware that a great deal of distress is sometimes caused when a shop changes hands and becomes a restaurant or a café and a juke box is installed which plays loud music from early in the morning until late at night? Will he in the necessary legislation see whether it can be backdated so that changes which have taken place over the last few years have to be renewed every 12 months or so?

Mr. Page: It would be difficult to backdate it but I am conscious of the hardship caused when there is a change from an ordinary shop to a restaurant. I have under consideration other types of trade in shops which come under the same category, such as launderettes and fried food shops.

A41 Bypass, Kings Langley—Tring

Mr. Allason: asked the Secretary of State for the Environment whether he has decided to hold public inquiries on the various sectors of the A41 bypass, Kings Langley to Tring.

The Under-Secretary of State for the Environment (Mr. Michael Heseltine): No, Sir. This is a matter for consideration after the objection period has ended in August.

Mr. Allason: Is my hon. Friend aware that there is considerable local concern about some sections of this route where both private and public amenities are seriously threatened? Would he make it clear that his mind is not closed about the final line of the route but that he will consider alternative suggestions and is prepared to consider tunnelling in places where the route seriously threatens public amenities?

Mr. Heseltine: My hon. Friend will know that those matters could be ventilated at the public inquiry should it be necessary. The objection period closes in about six weeks' time.

Mr. Raphael Tuck: For this bypass, and, indeed, all bypasses, including motorways, will the hon. Gentleman consider the system adopted in Germany on

autobahnen where lorries are prohibited from travelling in the outside lane, resulting in increased safety? Would he consider this suggestion particularly for the killer stretches of the Ml?

Mr. Heseltine: That is a different question from the Question under discussion, which concerns a bypass.

Diesel-powered Vehicles (Exhaust Emissions)

Mr. Michael McNair-Wilson: asked the Secretary of State for the Environment what discussions he has had with lorry makers about reducing exhaust smoke emissions from diesel-powered vehicles; and if he will make a statement.

Mr. Peyton: Last December I published a draft regulation which would require new diesel-engined vehicles to comply with the strict smoke limit included in the British Standard for diesel engines. I hope to announce shortly the terms of the final regulation.

Mr. McNair-Wilson: Can my right hon. Friend say how he intends to enforce the law when these vehicles get on the road and whether he has had any discussion with the vehicle industry about whether it would be possible to have a smoke meter installed in the cab to warn the driver that his vehicle was breaking the law?

Mr. Peyton: I will take into account the helpful suggestion made in the latter part of my hon. Friend's supplementary question. He has raised the difficulty of enforcement, which, alas, is an abiding problem to which I cannot give an easy answer, but it continues to receive very thorough attention.

Housing

Mr. Robert Cooke: asked the Secretary of State for the Environment what is the number of houses started in 1971 to the latest date for which figures are available; and what increase this represents in percentage terms over the figure for the corresponding period of 1970.

Mr. Amery: In Great Britain 131,400 houses were started up to the end of May, 1971, as against 120,900 over the corresponding period in 1970, an increase of 8·5 per cent.

Mr. Cooke: I congratulate my right hon. Friend on that reply. Can he say what progress it represents in the private sector?

Mr. Amery: Yes—an increase of 23 per cent. over the corresponding period last year.

Mr. Loughlin: Apart from the steps which were taken by the Labour Government, would the right hon. Gentleman tell the House what precise actions, except for advertising, the Government have taken to stimulate house building?

Mr. Amery: Yes; they are not difficult to itemise. There has been the encouragement given to local authorities to provide mortgages; co-operation with the building societies; and the appointment of a good Minister for Housing and Construction.

Mr. Crosland: Is the right hon. Gentleman aware that all of us, as we go round the country and visit our constituencies, are aware of the galvanic dynamic which he personally has induced? But would he give the House the starts for May this year compared with May last year, and, since they show a marked drop on May last year, will he be rather more modest in future about making these facile party polemical points?

Mr. Amery: The May starts this year were an improvement on the April starts, and the April starts were an improvement on the March starts. The total showed a marked improvement. The only—[HON. MEMBERS: "Answer."]—reason which leads the right hon. Gentleman to put that question is that the seasonal adjustment shows that the upsurge in building came rather earlier this year than it did last year.

Mr. Moyle: asked the Secretary of State for the Environment whether he will set out the aspects of housing which he took into consideration when helping to prepare the White Paper on public expenditure and the estimated amount of expenditure allocated to each aspect.

Mr. Peter Walker: I would refer the hon. Member to paragraph 35 of Cmnd. 4515.

Mr. Moyle: I am aware that it has not been the previous practice, and I am

grateful for the compliment which the right hon. Gentleman has paid to his Labour predecessor. Would he not agree that it is about time we had another look at this matter? How are we to assess whether the Government are planning for local authorities to lend more on mortgages this year than last year if we do not have the figures? As for relying on the word of Ministers, does not our experience of 18th June show that that is a risky business?

Mr. Walker: It is impossible accurately to predict the increase in local authority mortgages for this coming year but it is certain that it will be substantial. I have already announced a further £46 million increase in expenditure on improvement grants.

Mr. Frank Allaun: Is it not a fact that we in Britain devote only 3·7 per cent. of our G.N.P. to housing, compared with 5·5 per cent. for the rest of Europe?

Mr. Orme: Common Market?

Mr. Allaun: And other countries—all 22 of them. As this explains why Britain is bottom of the list, with one exception, for the number of houses built per thousand of population, will the Government increase our share of the G.N.P. instead of cutting it by £150 million per annum, as they propose to do?

Mr. Walker: I am very surprised at the hon. Gentleman's suggestion. The reason why other countries spend a greater proportion of their G.N.P. on housing than we do is that their rents are higher.

Contractors (Orders)

Mr. Geoffrey Finsberg: asked the Secretary of State for the Environment what was the total value, seasonally adjusted and at constant prices, of new orders received by contractors during the first quarter of 1971; and what percentage difference this represents relative to the figure for the corresponding quarter of 1970.

Mr. Amery: According to provisional figures collected by the Department, the value of new orders obtained by contractors in the first quarter of 1971 was £680 million at constant (1963) prices seasonally adjusted. This represents an


increase of 3 per cent. over the first quarter of 1970.

Mr. Finsberg: Is my right hon. Friend—to whom all of us on this side of the House pay tribute as against the complacency shown by the right hon. Members who sit on the Opposition Front Bench—satisfied with this figure? What further attempts will he make to help the building industry to get on with the job of housing the people, which is its job and not the Government's job?

Mr. Amery: I am not satisfied. We must do a great deal better. But there is a marked improvement in private sector housing. There is a marked improvement in public works—roads, schools and hospitals. There is a marked improvement in shops and offices. We have not yet achieved the improvement which we seek in industrial building or in the public sector, although I think that that will come when we announce, with the reform of housing finance, the improved grants for slum clearance.

Mr. Freeson: Whatever view may be taken about the future White Paper on housing finance, the proposals in it are not likely to take effect for another couple of years. What does the Minister propose to do to increase public sector local authority housing in the meantime, because that is the kind of housing which will help the constituents of the hon. Member for Hampstead (Mr. Geoffrey Finsberg) and my constituents?

Mr. Amery: I am already in the happy position of being able to say that public sector housing has not gone down in the way it did in the last two years of the previous Administration.

House Prices (Selective Employment Tax)

Mr. Urwin: asked the Secretary of State for the Environment what estimate he has now made of the effect on house prices consequent upon the halving of selective employment tax payments.

Mr. Peter Walker: It is estimated that the halving of selective employment tax will result in a decrease of between 1 and 2 per cent. in building costs. This represents about £60 on the cost of an average three-bedroomed house. The reduction in tax will affect public sector

housing prices in cases where the existing fixed price contract includes a tax fluctuation clause.

Mr. Urwin: Is the right hon. Gentleman aware that his reply is, to some extent, at variance with informed opinion in the industry, which is that there is very little likelihood of the reduction in the tax being passed on to the consumer? What steps does he intend to take to ensure that it is passed on and that there is an effective reduction in house prices?

Mr. Walker: I think it will result in an effective reduction in house prices and will certainly be of much more help than the action which the Labour Government took in increasing selective employment tax and putting the betterment levy on land.

Mr. Marks: Has the right hon. Gentleman made an estimate of the percentage increase which builders made in the price of houses when selective employment tax was introduced?

Mr. Walker: It was a very considerable addition to their costs.

Piccadilly Circus

Mr. Longden: asked the Secretary of State for the Environment what proposals he has under consideration for developing Piccadilly Circus; and if he will make a statement.

Mr. Graham Page: I understand that the Westminster City Council has produced a revised planning brief for the owners of the sites around the Circus, which takes account of the comments made by the public at the exhibition held in July, 1968. It is hoped that the owners' architects will shortly produce a new scheme. I am sure that the local authorities concerned and I would be delighted to see progress towards presentation of an acceptable project.

Mr. Longden: While thanking my hon. Friend for that answer, may I ask him whether I can persuade him and the Westminster City Council to agree with me that this famous rendezvous, once known as the heart of the Empire and still the mecca of tourists the world over, to whom London is presently the favourite capital city, is from every aspect a squalid eyesore—a place where every


prospect displeases and everything man-made is vile? If he does agree with me, what can he do about it?

Mr. Page: I agree to some extent with my hon. Friend on the importance of getting the right scheme for Piccadilly Circus. But getting the right scheme involves careful consideration of it. There has been some progress recently, because the Greater London Council decided on 22nd June, subject to the agreement of the Westminster City Council, to propose to the Greater London Development Plan Inquiry that the G.L.D.P. should be amended so as to make Westminster responsible for the preparation of the action area plan for Piccadilly Circus. I hope that as a result of that progress will be made with the developers and the local authorities. It is their job in the first instance, and I hope that they will proceed with it—[Interruption.]—and, as a right hon. Gentleman opposite says, with public participation.

Inner London Families (Movement to New Towns)

Mr. Selwyn Gummer: asked the Secretary of State for the Environment what is the total number of families which have left the Inner London boroughs during the past three years to take up residence in new or expanding towns.

Mr. Amery: The number of families from the inner London boroughs who have moved to rented housing in the new or expanding towns in the years 1968, 1969 and 1970 is estimated at approximately 8,500. No information is available about those moving to private housing.

Mr. Gummer: I thank my right hon. Friend for that answer, but does he not agree that many people are deterred from moving from Inner London boroughs to the new and expanding towns by the complication of the arrangements which are made, and that they find it difficult to get the necessary information? Will he please do something about this as a matter of urgency?

Mr. Amery: My hon. Friend is right; it is not as easy as it should be. I have been working closely with the Peterborough new town to see how its connection with Lambeth can be strengthened and improved.

Mr. McCrindle: asked the Secretary of State for the Environment what assistance is being given by his Department to families from inner London wishing to have houses and jobs in new and expanding towns; and how much this is expected to cost to public funds in the current financial year.

The Under-Secretary of State for the Environment (Mr. Paul Channon): The Industrial Selection Scheme helps people throughout London to find jobs in these towns and they are then eligible for a house. The main costs of operating the scheme fall on the Department of Employment and the Greater London Council.

Mr. McCrindle: Will my hon. Friend keep in touch with his hon. Friends at the Department of Trade and Industry to make sure that we do not reach a situation where there are available houses in the new and expanding towns but fewer jobs to go with them than one would wish?

Mr. Channon: Yes, certainly I can give that indication, and I take note of what my hon. Friend says.

Mr. George Cunningham: Will the Minister recognise that although many people in Inner London wish to move to new towns, there are many people living on average earnings who wish to remain in Inner London? Does he recognise that his policies and the withdrawal of subsidies will make it increasingly difficult for them to do so?

Mr. Channon: On the contrary, as I tried to explain—but the hon. Member refuses to understand—the whole purpose of changing the housing subsidies is to give more help to those people who are most in need.

Mr. Allason: Is my hon. Friend satisfied that there are satisfactory opportunities for the unskilled, who can be trained to do semi-skilled jobs in the new towns, as opposed to the Industrial Selection Scheme, which tends to give opportunities to the skilled?

Mr. Channon: My hon. Friend is quite right. It would be better if there were more opportunities of this kind, and I will certainly keep this under review.

Mr. Speaker: Question No. 22.

Mr. Tilney: On a point of order. Yesterday's Notices of Motions and Orders of the Day contained a Question in my name, between the Questions of my hon. Friends the Members for Billericay (Mr. McCrindle) and Westmorland (Mr. Jopling), asking the Secretary of State for the Environment what his policy is towards a combined approach to the multiple problems of inner city areas, such as is being undertaken by Shelter Neighbourhood Action project in Liverpool. This Question appears to have been left off the Order Paper. Could this matter be looked into, and could the Minister reply?

Mr. Speaker: I much prefer to take points of order about Questions at the end of Question Time. I will look into the matter.

Hon. Members: It is Question No. 66.

Council House Sales

Mr. Tebbit: asked the Secretary of State for the Environment if he will take steps to ensure that local authorities, when reversing a previous decision to sell council houses, will in future be required adequately to reimburse and compensate any prospective purchaser who might previously have entered into negotiations with the local authority with a genuine view to purchase.

Mr. Amery: It is a well established practice in this country, at all levels of government, for a new administration to keep the public faith when this has been committed by its predecessor.
I am confident that authorities will remember this when considering the expenses incurred by people who had been negotiating in good faith to buy their council houses and are now told that the council has decided to sell no more houses.

Mr. Tebbit: Will my right hon. Friend go so far as to write to local authorities reminding them of their moral obligation, as constituents of mine in the borough of Waltham Forest and the urban district of Waltham Abbey who have spent their savings on improving houses which they believed they would be able to buy are astounded at the ill-faith and the narrow partisan politics of those who deny them the opportunity of doing so? Is he aware that amongst my constituents are those

who sold their cars and cancelled their holidays so as to carry out these improvements, and that they need satisfaction?

Mr. Amery: I want to lead a campaign for a genuine property-owning democracy with the right of those who are on the housing list to be able to buy their own homes from the council.
These are not my words. These are the words of the right hon. Gentleman the Shadow Patronage Secretary.

Mr. Simon Mahon: Those of us who have been in local government for a long time have a high regard for it. Irrespective of political parties, are not most people who serve on local authorities highly honourable men? Will the Minister tell us how many such cases as described by the hon. Member for Epping (Mr. Tebbit) he has on his files?

Mr. Amery: I am afraid it is rather more than I should like to see. [HON. MEMBERS: "How many?"] The hon. Gentleman has not given me notice of that question. I have seen a number of these cases, and I should like to see right hon. and hon. Gentlemen opposite endorse the views expressed by the right hon. Member for Bermondsey (Mr. Mellish) when he was Minister of Housing.

Mr. Freeson: In view of that last observation, perhaps the Minister will consult his right lion. Friend who, shortly after taking office, forbade the building of houses for sale. This was the point my right hon. Friend the Shadow Patronage Secretary was making in the speech quoted by the Minister, which should have been quoted in full. Is the Minister aware that most local authorities which have this situation on their hands have pursued an honourable course and are arranging to pay compensation, including my own council governing Brent? It is wrong and misleading for this kind of smear campaign to be encouraged by the Minister.

Mr. Amery: The hon. Gentleman is quite wrong in suggesting that I am quoting his right hon. Friend's words out of context. The passage about the desirability of building for sale came about 10 minutes later in the same speech, and the passage I have quoted was strictly relevant to the question of the sale of council houses. This is what


matters, and it is regrettable. I hope that I can interpret the not very buoyant but somewhat ambiguous phrase of the hon. Gentleman as indicating that he would hope that Labour councils which have gone back on previous arrangements will at least keep the contracts which have been made.

Sir R. Thompson: Will my right hon. Friend tell me whether he has any statutory powers to lay down the scale of prices which local authorities should charge when they seek to sell their houses? Is he aware that in many cases prices are being pitched too high, and is not this frustrating the intentions of the Government?

Mr. Amery: Regrettably, I have no powers in this matter, but the great majority of the councils have been prepared under covenant terms to sell houses at a discount of about 20 per cent.

Heritage Coasts

Mr. Jopling: asked the Secretary of State for the Environment whether he will take steps to alter the name of Heritage Coasts.

Mr. Peter Walker: My right hon. Friend the Secretary of State for Wales and I will be happy to consider all suggestions for alternative names.

Mr. Jopling: Is my right hon. Friend aware that I had difficulty in hearing that answer? Is he also aware that the name "Heritage Coasts" is nonsense from a grammatical point of view, is likely to be highly misleading to people who visit those areas and has been widely opposed by a variety of organisations? Will he ask the Countryside Commission to think again and suggest a better name?

Mr. Walker: If my hon. Friend had heard my reply, he would have heard me say that I shall be happy to consider all suggestions for alternative names.

Sports (Financial Assistance)

Mr. Dalyell: asked the Secretary of State for the Environment what plans he has to give financial assistance to sports other than football and swimming.

Mr. Eldon Griffiths: In recent years sports other than association football and swimming have received over 95 per cent. of the total grants given for sport by my

Department, and I have no reason to think there will be any significant difference in the proportion this year. How grants are distributed after this year will be a matter for the new Sports Council.

Mr. Dalyell: What consultations did the lion. Gentleman have with sports bodies, and, indeed, with the Sports Council, before slashing local grants?

Mr. Griffiths: I had all the necessary consultations with the Sports Council on matters on which it could properly advise me. I thought it right that the House of Commons should be the first to hear about the use of Government funds for sports purposes.

Mr. Scott-Hopkins: Is my hon. Friend aware that his announcement has caused considerable confusion among local authorities, particularly voluntary bodies, which have already raised considerable sums of money, for example, at Ashbourne in my constituency for swimming pools, and which are now left high and dry and do not know whether to proceed? Will he look at the matter again?

Mr. Griffiths: I assure my hon. Friend that all local sports bodies which have had applications in the pipeline will receive grant if they have already received notification from my Department that they have been given the necessary priority. If they have not received that priority, they will be caught by the new policy.

Mr. R. C. Mitchell: Will the hon. Gentleman seek powers to give financial assistance to chess as well as to the other sports and games to which reference has been made? Does he realise that chess is played in this country by more young people than any other game, apart from football?

Mr. Griffiths: The definition laid down in regard to which sports and recreations are to be supported refers to "physical recreation" and, with the best will in the world, I would not describe chess as a physical recreation.

Mr. Denis Howell: Is the hon. Gentleman aware that his decision to end these grants of £1 million a year to the ordinary sports clubs has caused widespread dismay throughout the whole of


sport? The hon. Gentleman stated a moment ago that he consults the Sports Council on matters on which he thinks it can advise him. But since he never consulted that body or the governing bodies of sport about the effect of this catastrophic decision, and in view of the dismay it has caused, why does he act so arrogantly in not consulting the body set up to advise him on these matters?

Mr. Griffiths: The hon. Gentleman knows a great deal more about catastrophe in sport than I do. At a time when the present Government have enhanced the status of the Sports Council, have widened its responsibilities and have given it a great deal more money, I am not prepared to be lectured by the hon. Gentleman.

Mr. Howell: Is the Minister aware that the extra £1 million which the Department is to give to the independent Sports Council is being found from the money which has been slashed from grant? Is he not making a bogus point, and would he answer the simple question why in ending this scheme he did not consult the people appointed to advise him, the Sports Council?

Mr. Griffiths: On the second point—[HON. MEMBERS: "Answer!"] If hon. Members opposite will listen, I will seek to give an answer. The hon. Gentleman asked two questions. The second part dealt with consultation. I was dealing with the funds of national Government, and it seemed to me right that the House of Commons should be the first to know this information. As to the first part of the question, the hon. Gentleman is totally wrong. He suggests that the additional £1 million to be made available to the Sports Council—which the hon. Gentleman was never able to obtain during his term of office—has somehow been found by slashing local capital grants. My right hon. Friend the Secretary of State for the Environment was able to find this additional money for sport because of the advantages of setting up the Department of the Environment and thus being able to make these new funds available for sport.

Mr. Dalyell: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest possible moment.

Mr. Speaker: Let us come to cooler waters—reservoirs. Mr. David Clark, Question No. 26.

Reservoirs (Public Access)

Mr. David Clark: asked the Secretary of State for the Environment if he is satisfied with facilities for public access to reservoirs; and if he will make a statement.

Mr. Eldon Griffiths: Because I was not satisfied when I assumed responsibility for sport that everything possible was being done to make full use of the recreational potential of reservoirs, I asked all statutory water undertakings in England to review their policies in consultation with regional sports councils. I am glad to be able to say that no fewer than 34 water undertakings have recently made, or plan to make, increased provision for recreational use of their reservoirs, and I shall be considering what follow-up action might be called for on the basis of the regional sports councils' detailed reports.

Mr. Clark: I thank the hon. Gentleman for his reply. Will he further press the water boards to give access to the public to the water's edge of these reservoirs? Does he realise that there is hardly any reservoir that allows the public this facility?

Mr. Griffiths: Wherever it is possible for the public to be given safe access to reservoirs, then requests which have been made by my Department, followed up by the regional sports councils, are in that direction. The hon. Member will understand that there are certain reservoirs where matters of safety make it difficult to insist on such a course.

Sir D. Renton: Apart from the matter of safety can my hon. Friend, who has knowledge of Grafton Water in my constituency, say why these magnificent facilities cannot be provided in most other reservoirs?

Mr. Griffiths: My right hon. and learned Friend will know that Grafton Water had the advantage when originally planned of recreational considerations being taken into account at the beginning. This is not the case with some of the older reservoirs, where the problem is rather more difficult.

Mr. Tinn: Is the hon. Gentleman aware that the Derwent Reservoir in the County of Durham, which was opposed by some conservationists on scenic grounds, is now a beauty spot with planned access and also with controlled access for boating? Will he urge on the responsible authorities for the older reservoirs the need to develop such facilities?

Mr. Griffiths: Yes, indeed. I had the pleasure of visiting Derwent Reservoir, and I agree absolutely with what the hon. Gentleman has said. The efforts of the Government are directed to persuading and assisting other water undertakings to do the same sort of job where it is practicable to do so.

Sports Council

Mr. Ashton: asked the Secretary of State for the Environment what estimates he has made of the savings to Government funds and increased costs to local government funds with regard to his decision on the future of the Sports Council.

Mr. Eldon Griffiths: There is no basis in fact for doing this. The Government's allocation to sport is being substantially increased, and will be distributed to better effect. Local government expenditure will depend on the use local authorities choose to make of their powers.

Mr. Ashton: Is the hon. Gentleman aware that we are still not satisfied with the situation? Many hon. Members on this side of the House and certain sporting bodies believe that some clever duplicity is taking place over this matter. In view of the hon. Gentleman's statement that direct grants to local clubs will be discontinued, can he assure the House that local clubs will get the same or more money as easily as they did in the past?

Mr. Griffiths: To a great extent local sports clubs ought to be supported by local funds. The advantage of the changes I have announced is that national funds, substantially increased, will be able to be distributed for the benefit of sport as a whole. I am sure that this is the right way forward.

Mr. Denis Howell: Having regard to the fact that in making this announcement the Minister expressed the view that these grants should be paid by local authorities, and in view of the fact that

he not only did not bother to consult the Sports Council but did not even bother to consult local authorities—and indeed, received no commitment from them to take over these local grants—is not his arrogance to the sports bodies matched by the impudence of his attitude to local authorities?

Mr. Griffiths: The hon. Gentleman will be disappointed, because the sporting bodies have shown considerable enthusiasm for these proposals. I emphasise that the Sports Council, acting independently, will have substantially more money than the hon. Gentleman was able to get for it.

Channel Tunnel

Mr. Sheldon: asked the Secretary of State for the Environment if he will make a further statement on the Channel Tunnel.

Mr. Peyton: No, Sir.

Mr. Sheldon: In a previous exchange the Under-Secretary of State referred to information showing that a road link would be uneconomic. Will the Minister publish this information?

Mr. Peyton: I will certainly look at the point. Is the hon. Gentleman referring to a road tunnel?

Mr. Sheldon: A road link.

Mr. Peyton: I will certainly look at the point, and I shall be grateful if the hon. Gentleman will explain more fully what he means.

Mr. Sheldon: The previous exchange referred to any form of road link across the Channel; and, although the Minister has many times said that he would provide information if requested, he has failed to do so in reply to a number of Questions I have put to him. Does that view apply to this matter also?

Mr. Peyton: The hon. Gentleman is an habitual questioner. I do my best to provide exhaustive and constructive answers. I am sorry that I have disappointed him. I am not quite sure lo what he is referring. If he is referring to the possibility of a road tunnel, I am obliged to tell him that my advice is that ventilation problems, apart from anything else, would be an almost insurmountable barrier.

Compulsory Purchase (Compensation)

Mr. Costain: asked the Secretary of State for the Environment whether he will give an assurance that he will announce the results of his review of the code of compensation for compulsory purchase before the end of this year and that he introduce legislation to improve compensation during the life of this Parliament.

Mr. Peter Walker: As I told my hon. Friends the Members for Buckingham (Mr. Benyon) and Blackpool, South (Mr. Blaker) on 12th May, I shall announce details of our proposals when our review has been concluded and I hope to introduce legislation at the earliest possible date.—[Vol. 817, c. 359–61.]

Mr. Costain: Will my right hon. Friend accept that when a house is compulsorily purchased, the occupant is giving up something for the benefit of the community? Is it not only reasonable to expect that he should receive enough compensation to allow him to buy a similar property? Does my right hon. Friend appreciate that the Chancellor is charging capital gains tax on these transactions, which makes this more difficult?

Mr. Walker: This is a complicated matter. We are examining the problem in great depth, and we will publish proposals as soon as possible.

Mr. Tinn: Would the Minister look at the powers and practices of some local authorities in encouraging house owners to move out of their property some weeks in advance of a visit by the district valuer, who visits the property after vandals have taken their toll, with the consequence that the resultant valuation inflicts a grave injustice on the owners?

Mr. Walker: I have not been contacted about this particular practice, but if the hon. Gentleman would like to give me details, I will certainly look into it.

Water Supplies (Devon)

Mr. Carol Johnson: asked the Secretary of State for the Environment what was the purpose of the meeting which took place on 14th Tune, 1971, between one of the Under-Secretaries of State and

the Devon River Authority and Southwest Devon Water Board; and if he will make a statement.

Mr. John Hannam: asked the Secretary of State for the Environment if, following the recent visit to the Southwest of the Under-Secretary of State, he is now able to make a statement regarding the water shortage in Devon.

Mr. Peter Walker: My hon. Friend visited the South-West and met representatives of the Devon and Cornwall river authorities and water undertakers to hear and see something of their problems first hand, and to find out how central Government might help with the immediate problems, in particular of drought in parts of North Devon. In the event, rain has put off the need to use stand-pipes to restrict consumption. The North Devon Water Board is now exploring the practicability of partly filling the Meldon reservoir in advance of the completion of the dam so as to avoid shortages next year.

Mr. Johnson: I thank the right hon. Gentleman for that very full statement. Would he give an assurance that the House will not be asked to reverse the decision of one of its Select Committees rejecting the proposal for a reservoir at Swincombe on Dartmoor?

Mr. Walker: I have no power to give such an assurance, because if a Bill came before Parliament with any such proposal it would be up to Parliament to decide.

Road Accidents and Licensing Hours

Mr. William Price: asked the Secretary of State for the Environment what study has been made of the possible consequences of extended licensing hours on the level of road accidents.

Mr. Peyton: None, Sir, but I am sure that this will be among the matters considered by Lord Erroll's committee on liquor licensing laws.

Mr. Price: Is the Minister seriously suggesting that no study whatsover has been made of this matter by his Department? When he is reported to be considering changes in the breathalyser law and in many other road safety matters,


is it not strange that the curious fellow at the Home Office is determined to turn us into a nation of all-night drinkers? Is it not time that the Minister got a grip of the Home Secretary?

Mr. Peyton: The hon. Gentleman is living slightly in the past when he refers to "the curious fellow at the Home Office".

Mr. Price: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek to pursue the Home Secretary on the Adjournment.

Local Government Boundary Commission

Mrs. Kellett-Bowman: asked the Secretary of State for the Environment if he will make a statement about the rôle of the Local Government Boundary Commission and, in particular, whether the Commission will be able to adjust county boundaries in future.

Mr. Peter Walker: My consultations with the local authority associations have shown there is very general agreement on the proposal to set up a permanent and independent Local Government Boundary Commission for England. It is intended that the Commission shall make recommendations about local government boundaries and electoral areas. The Commission's future work, after reorganisation, will accordingly cover all boundaries and it will be able to propose adjustments to county boundaries.

A63 (Elloughton Bypass)

Mr. Wall: asked the Secretary of State for the Environment if he will make a statement about progress on the Elloughton bypass on the A63.

Mr. Michael Heseltine: Work is on schedule and should be completed in October.

Mr. Wall: Would my hon. Friend say whether compensation has now been paid to all the landowners and others concerned?

Mr. Heseltine: I shall have to write to my hon. Friend with the details of that matter.

Severnside Study

Mr. Adley: asked the Secretary of State for the Environment when he expects to complete his discussions with local planning authorities and regional councils about the Severnside Study.

Mr. Graham Page: As we are only just starting the consultations, it is too early to say when they will be completed. They will be pursued as quickly as possible with all parties concerned.

Mr. Adley: Would my hon. Friend bear in mind that the pressures on the green belt to the north and east of Bristol are already extreme and that to many of us it is extraordinary that the Severnside Study did not even mention the shortly to be opened Avon Bridge? Would he please bear in mind that a final decision should not be made until the exact shape of Area No. 26 is decided.

Mr. Page: I am grateful to my hon. Friend for raising these points. They will all be taken into consideration when examining the study.

Mr. Roy Hughes: Would the Minister also bear in mind the fact that there are two sides of the Channel?

Mr. Page: I presume that I know to which Channel the hon. Gentleman refers. The Welsh planning authorities and Planning Council will be brought into the study.

M1, Yorkshire (Intersection Lighting)

Mr. Duffy: asked the Secretary of State for the Environment if he will take steps to equip all intersections on the M1 motorway in Yorkshire with lighting.

Mr. Eldon Griffiths: No, Sir.

Mr. Duffy: Is the hon. Gentleman aware that some such intersections of motorways in Yorkshire are so equipped and some are not? Does not this suggest a lack of policy on the part of the Department of the Environment? Is not some uniformity desirable on safety grounds?

Mr. Griffiths: Where the connecting roads carrying traffic to and from these motorway interchanges are lit, it is perfectly reasonable coat the interchanges


themselves should be lit. But, generally, where there is grade separation, it is not necessary.

Pedestrian Crossings (Accidents)

Mr. Clinton Davis: asked the Secretary of State for the Environment if he will make a statement concerning the large number of fatal and other accidents which occurred on pedestrian crossings in England and Wales during 1970.

Mr. Eldon Griffiths: It is safer to cross at a crossing than elsewhere but I share the hon. Member's concern about these casualties. My right hon. Friend announced yesterday new measures to improve the safety of zebra crossings.

Mr. Clinton Davis: I thank the hon. Gentleman for that reply. Is he aware that there were no fewer than 1,722 serious casualties, including a number of fatal accidents, on pedestrian crossings last year? Is his Department giving full consideration to the possibility of more road islands being installed on pedestrian crossings as a means of ensuring a greater safety factor?

Mr. Griffiths: My Department is considering all these possibilities. The short answer to the hon. Gentleman is that yesterday my right hon. Friend introduced a series of new safety measures which has been exceedingly well received.

M18, Doncaster

Mr. Harold Walker: asked the Secretary of State for the Environment (1) why the maps and diagrams published in connection with his proposed roads programme all show the proposed M1 8 extension as bypassing the County Borough of Doncaster when he has published proposals showing it going through the town;

(2) if he is aware that traffic levels are such that Doncaster is now one of the most congested towns in Yorkshire and that Doncaster is one of the most ancient and historic boroughs in that county; and why he proposes to route the M18 motorway through the town in contradiction of the policy announced on 23 rd June.

Mr. Graham Page: The lines on the maps illustrating my right hon. Friend's announcement of additions to the road

programme were diagrammatic. Actual alignments are determined by statutory procedure. The inspector's report on the public inquiry into the proposed extension of the M18 is now under consideration. The decision will take into account the points made by the hon. Member.

Mr. Walker: Irrespective of the lack of clarity of the maps and diagrams, is not the Minister's proposal to put the motorway through the heart of this county borough completely irreconcilable with his published policy of the week before last to bypass towns and boroughs? Will he look again at his proposal.

Mr. Page: There has never been any suggestion of putting the motorway through the heart of Doncaster. The lines on the map show it touching the fringe. It goes through the outer area of the town.

Mr. James Johnson: Will the Minister show the most indecent haste in this matter in view of the fact that, one of these days, we hope that the Ml8 will get us quicker to Hull?

Mr. Page: I am anxious to settle the matter and to give the hon. Gentleman proper access to his town.

EUROPEAN COMMUNITIES (WHITE PAPER)

The Prime Minister (Mr. Edward Heath): With your permission, Mr. Speaker, and that of the House, I should like to make a statement on the subject of the European Communities.
The White Paper which I promised in my statement on 17th June is being presented to Parliament and published this afternoon. Copies will be available in the Vote Office at the conclusion of this statement. It is a comprehensive and detailed document, and inevitably long. The Government have therefore decided also to publish a short version next Monday.
The White Paper records the Government's conclusions as follows:

(1) The Government are convinced that our country will be more secure, our ability to maintain peace and promote development in the world greater, our economy stronger, and our industries and peoples more prosperous, if


we join the European Communities than if we remain outside them;
(2) the Government are satisfied that the arrangements for our entry agreed in the negotiations will enable us to adjust satisfactorily to our new position as a member of the Communities and thus to reap the full benefits of membership;
(3) the Government will therefore seek the approval of Parliament in the autumn for a decision of principle to take up full membership of the Communities on the basis of the arrangements which have been negotiated with them.

Mr. Harold Wilson: While thanking the right hon. Gentleman for his statement, may I also express the thanks of hon. Members in all parts of the House for the arrangement that he has made that, in addition to the White Paper which hon. Members will want to study, extra copies will be available for hon. Members to disseminate to constituents and others that they may take part in the debate?
The right hon. Gentleman did not, as I hoped that he might, intimate to the House the arrangements for the debate. No doubt he will arrange for his right hon. Friend the Leader of the House to do that, perhaps tomorrow. On my understanding, the arrangements proposed for the debate are generous and will be acceptable to hon. Members, both as regards the "take note" debate this month and the definitive debate in October. Will the right hon. Gentleman arrange for the House to be given full details of those proposals?
The right hon. Gentleman said that the White Paper was long, detailed and would take a lot of deep study by hon. Members in all parts of the House. I am sure that the right hon. Gentleman will agree that, from that moment, we in this House and the country can have the great debate based on substance for which we have all called. It is a debate which could not really get off the ground until the terms of entry were known. Since we shall now be able to argue on the basis of facts which were not, and could not be, available until today—[HON. MEMBERS: "Come off it."] If hon. Members oppo-

site do not agree, perhaps I might point out that I am quoting from the last issue of the Conservative Weekly News. Whatever views some hon. Members may have, I am sure that the Prime Minister wants to see a great debate on this issue and that he agrees with those wise words in the Conservative Weekly News.

The Prime Minister: I thank the right hon. Gentleman for his opening remarks. My right hon. Friend the Leader of the House will be prepared to make a statement tomorrow about details of the forthcoming debate, and the House will see that proper time is being allowed before the debate for study of the White Paper. There will be full opportunity for this exploratory debate before the House rises for the Summer Recess. I agree that it is right that the great debate should begin. The Government have endeavoured to set out as clearly as possible in the White Paper all the details of the arrangements negotiated in Brussels and our assessment of them.

Mr. Sandys: Is not it clear that the arrangements which have been negotiated are as favourable as any which this Government or their predecessors could possibly have hoped to obtain and, therefore, that no one who previously supported Britain's entry into the Common Market can now reasonably justify a change of mind on the grounds that the terms are unsatisfactory?

The Prime Minister: Those who have been able to follow the details of the negotiations stage by stage as they have been announced to the House by my right hon. Friend the Chancellor of the Duchy of Lancaster will agree that the arrangements that have been made are favourable. What the White Paper does is to enable the House and the public to look at these arrangements together as one piece. It will then be for every hon. Member to make up his mind about his attitude to them.

Mr. Thorpe: Is the Prime Minister aware that the House will be grateful for this very detailed White Paper? Whatever view is taken on the merits of the case, since this is one of the greatest decisions that Parliament will have had to take for a very long time, will the right hon. Gentleman not rule out the possibility of a free vote in the autumn when this matter is discussed?
Can the Prime Minister say whether, during the negotiations to safeguard essential British interests, the approach of Her Majesty's Government differed in any material particular from that of their predecessors?
Is the Prime Minister aware that he will be supported by those who have consistently favoured entry into Europe if, to quote the words of the former Prime Minister on 2nd May, 1967, he carries on
… with all the vigour and determination at our command
to ensure our entry into Europe?

The Prime Minister: Certainly I am prepared to do that. I think that I have dealt with the right hon. Gentleman's first question previously in the House. What I have done today is to announce a very clear decision of the Government on this great matter. The Government, therefore, are fully entitled to ask their supporters to support the decision that they have taken. This is the constitutional position which the House will respect.
As for the actual arrangements, as is well known and is also stated frankly in the White Paper, when we came to power the first meeting for negotiations had been arranged by the previous Administration. They had stated what they considered to be the major problems. The present Government took over from that point, accepting that statement of the problems, and have negotiated on them since. Most commentators in this country, in Europe, in North America, and throughout the Commonwealth are agreed that the arrangements which have been negotiated are rather more favourable than were originally expected by those observing the scene.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: Order. There is a long White Paper to be read. A long debate is awaited. I am told that there will be a liberal allocation of time for it. In the circumstances, I think that we must move on to the next business.

BRITISH STEEL CORPORATION

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies): With permission, Mr. Speaker, in view of the widespread speculation since yesterday in the Press, I should like to make it clear that neither my hon. Friend the Minister for Industry nor I in any way would wish, or have taken steps, to deprive Members of Parliament of any information from a nationalised industry which they might reasonably expect to have, subject always to normal commercial confidence.
Moreover, the nomination and appointment of officials of the British Steel Corporation are matters for the Chairman and nothing whatever to do with me.

Mr. Michael Foot: First, may I express the hope that the right hon. Gentleman will take an early opportunity of clearing up the discrepancy between the statement he has now made to the House and the statement which his Department handed to me about ten minutes ago which, in many respects, is quite different from the statement which he has just, made to the House?
The right hon. Gentleman can clear up the matter, but he gave a different account. [HON. MEMBERS: "Read it."] The right hon. Gentleman can clear up the matter in his own Department.

Hon. Members: Withdraw.

Mr. Speaker: Order. The hon. Gentleman must ask questions.

Mr. Foot: I propose, Mr. Speaker, if you will permit me, to put a question in a moment. However, I think that I am perfectly entitled to protest against a procedure which, so far as I know, is quite unprecedented in this House; namely, when a Minister comes and make a statement in different terms from that which has been handed to the Opposition only a few minutes before. I suggest that I might take up this matter with you, Mr. Speaker, to see whether we can avoid such questions in future.
First, we do not accept the right hon. Gentleman's statement. [HON. MEMBERS: "Oh."] We do not accept his statement because there is a plain conflict of testimony between what he said


when he claimed—[HON. MEMBERS: "Read it."] We do not—[Interruption.]

Mr. Speaker: Order. This is a serious matter. The Minister was allowed to make his statement and the hon. Gentleman must be allowed to put his question without interruption.

Mr. Foot: Will the right hon. Gentleman understand that we do not accept his statement? That is my first question.
Will he understand that the reason we do not accept his claim that no representations have been made by the Government or Ministers to Lord Melchett about this question is that a meeting took place on 27th May, three days after we had the debate on the steel industry in this House, at which matters were raised by the Minister for Industry with Lord Melchett, so much so that Mr. William Camp was called upon by his superior in the British Steel Corporation to present the answer which he would offer to the objections, criticisms and representations which had ben made by the Minister for Industry?
Is the right hon. Gentleman further aware that I have in my hand—I see it now for the first time following the events of yesterday—the document which Mr. William Camp presented to his superior in the British Steel Corporation and that one of the major matters involved in that memorandum concerns the figures which were supplied to me at my request and which I used in that debate? Does not the right hon. Gentleman think that if a Minister objects to figures used in the House of Commons he should either try to answer them in the House or, indeed, that he might even have approached me on the subject? Does the right hon. Gentleman think that it is right that his Minister should have resorted to these disreputable backstairs methods for trying to deal with figures which he had not been prepared to answer in the House? Is he, therefore, prepared to agree that, in order to clear up this conflict of testimony in which the good faith of his Minister, and, it may be, of the right hon. Gentleman himself, is involved, there shall be an independent inquiry into all the facts which I have charged?

Mr. Davies: I should certainly apologise to the hon. Gentleman for the fact that my statement was not couched in the

precise words of the statement which he had. However, I think that he will agree that the sense of what I said was identical with what was in the statement. [HON. MEMBERS: "Read it now."] I will certainly read it now. With permission, Mr. Speaker—

Mr. Speaker: Order. I remind hon. Members that a copy of a Minister's statement is supplied to the Opposition by courtesy. If this kind of interchange is to mean that that courtesy is no longer observed, it will be a great pity.

Mr. Davies: With permission, I should like to read the original statement.

Mr. John Morris: On a point of order, Mr. Speaker. May I ask your guidance on this matter? If, as is traditional, a Minister hands to an official Opposition spokesman an advance copy of the statement which he intends to make, is it not equally courteous, if the Minister intends to depart from it, for him to tell the House at the same time?

Mr. Speaker: It depends entirely on the time factor. I ask the House to cool down on this issue. This is an exchange of courtesies between the Front Benches whereby a copy of a statement is given as soon as convenient. I have known many occasions on which there have been minor changes. Providing copies of statements to be made is one of the more agreeable courtesies of the House. I think that this kind of exchange may threaten it.

Mr. St. John-Stevas: On a point of order, Mr. Speaker. Are not all hon. Members of this House equal, be they front of back benchers? Could not this courtesy, if it be a courtesy, of giving advance printed copies of statements be extended to all hon. Members at large?

Mr. Speaker: There may be something in what the hon. Gentleman says.

Mr. Davies: If there had been any difference in sense, Mr. Speaker, I would, of course, have said something beforehand. I will now read the original text and you will see that there is no difference in the sense.
In view of the amount of public speculation, I should like to inform the House that the Government have made no representations to Lord Melcbett about information supplied by Mr. William Camp of the British Steel Corporation to Members of Parliament. The action taken by the Corporation in relation


to his appointment was entirely within their responsibility and, as they have made clear, the Government have not been involved in any way.
I do not think that I went beyond that.
In answer to the specific question put by the hon. Member for Ebbw Vale (Mr. Michael Foot), I consider that there is simply no occasion to institute any special inquiry. The facts of the case are abundantly clear and bear out precisely what I have said.

Mr. Foot: Mr. Foot rose—

Hon. Members: Withdraw.

Mr. Foot: Will the right hon. Gentleman now tell the House—

Hon. Members: Withdraw.

Mr. Heffer: Put a sock in it.

Mr. Foot: I know that hon. Gentlemen opposite do not care by what backstairs methods people are sacked from their jobs. Will the right hon. Gentleman now tell the House—[HON. MEMBERS: "Withdraw."]—whether the Minister for Industry had a meeting with Lord Melchett on 27th May and, if so, what occurred?

Mr. Davies: I am sure that my hon. Friend had a meeting on the date in question. Indeed, over that period I think that he was having almost daily meetings with the Chairman of the Steel Corporation, so nothing would surprise me less than that he met him on that occasion. I assure the hon. Gentleman that in the course of that meeting my right hon. Friend did not complain of any figures put to the hon. Gentleman by the Chairman.

Mr. Foot: Mr. Foot rose—

Mr. Speaker: Not again, and again, and again.

Sir F. Bennett: Mr. Speaker, I was going to ask for your help, or that of somebody, to see whether we could have an explanation of what difference there was, or is, between the two statements. I am not pursuing the point of order that was raised. I should like to know what all this is about.

Mr. Foot: If the right hon. Gentleman—

Hon. Members: Answer.

Mr. Foot: If the right hon. Gentleman claims that at the meeting of 27th May between the Minister for Transport Industries and Lord Melchett the question of the figures which I had used in the House was not raised, could he tell mc why, in this memorandum, Mr. William Camp was called upon to explain why I had those figures in my possession?

Mr. Davies: That is not a matter for me. [Interruption.] That is a matter for the Chairman of the British Steel Corporation.

Mr. Harold Wilson: Since, presumably, the matter is not going to be left where it is, will the right hon. Gentleman say, in the light of the meeting which he thinks took place on 27th May, whether the Minister made any complaints about the officer of the Corporation who has been incontinently sacked?—[Laughter.] This is no—[Interruption.]— I have all day, Mr. Speaker. I hope that you have. This is no laughing matter, either as regards natural justice in the conduct of a nationalised industry, or the supply of information to this House. I put my question to the right hon. Gentleman. I hope that he will answer it.

Dame Irene Ward: I did not hear it.

Mr. Harold Wilson: The hon. Lady could not hear it because of the noise made by hon. Gentlemen opposite, who do not want this brought out.
Does not the right hon. Gentleman agree that it is the normal practice for officers of nationalised industries to supply information to hon. Members on both sides of the House? The gentleman in question used to supply it to the Minister for Transport Industries when he was Opposition spokesman on these questions, so will the right hon. Gentleman say what is the basis of any complaint that this should be done?
Third, will he say whether there is a new rule now that nationalised industries may not communicate with the Opposition? Will he ensure that a full statement is made on communications between another nationalised industry, the Bank of England, and the then Leader of the Opposition?

Mr. Davies: In the first place, I have the assurance of my hon. Friend that at any such meeting he had no complaint, and was in no position to make a complaint, against the work of an individual in the service of the Corporation. That is a matter entirely for the Chairman.
Second, the right hon. Gentleman apparently did not listen to what I said earlier. I made it abundantly clear that I am entirely in favour of information being made available to Members by nationalised industries, subject always to reasonable commercial confidence. I repeat that in case the right hon. Gentleman did not hear it the first time. Therefore, I doubt whether there is any need for me to answer the right hon. Gentleman's third question.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: I think that we must proceed—

Mr. John Mendelson: On a point of order, Mr. Speaker, and we are not going to be deflected by the baying of the sheep on the benches opposite. However much the post-luncheon crowd may bay—

Mr. Speaker: Order. The House has a great deal of business to do today. May the hon. Member be heard in silence.

Mr. Mendelson: In these exchanges, which seriously affect the debate held on the steel industry, no back bencher from a steel constituency, or any other constituency, has been called to put a point of view. Surely it is customary that when a major industry of this kind is involved one or two Members from such

constituencies are allowed to make a contribution? I put it to you, with respect, that as we have spent only a little time on two statements, you should now allow a back bencher or two from steel areas to ask whether, in view of the conflict between the two statements, the Minister will agree to an inquiry.

Mr. Speaker: I do not think that this is a debate, and in any case the point made by the hon. Member has already been raised. I have to try to safeguard the time of the House.

Mr. Foot: On a point of order, Mr. Speaker. May I give notice that in view of the plain conflict of testimony, which involves the good faith of Ministers in this House, particularly in their dealings with Members, we shall propose to return to this matter in the House.

BILL PRESENTED

ANGUILLA BILL

Secretary Sir Alec Douglas-Home, supported by Mr. Joseph Godber, Mr. Terence L. Higgins, Lord Balniel presented a Bill to make further provision with respect to Anguilla: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 208.]

BUSINESS OF THE HOUSE (FINANCE BILL)

Ordered,
That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill, notwithstanding the practice of this House as to the interval between the stages of such a Bill.—[Mr. Barber.]

Orders of the Day — FINANCE BILL

Not amended in the Committee and as amended in the Standing Committee, further considered.

Clause 22

CLOSE COMPANIES

3.58 p.m.

Mr. Joel Barnett: I beg to move Amendment No. 85, in page 20, line 13 leave out 'ending' and insert 'commencing'.

Mr. Speaker: With this Amendment we can also take Amendment No. 27, in page 21, line 7, leave out 'ends' and insert 'commences'.

Mr. Barnett: The Amendment seeks to remove the retrospective element in the Clause. Hon. Members who served on the Committee upstairs will recall what the Clause does when I refer to the retrospective element. What we are debating here is retrospective assistance of £500,000 to 30 close companies, in other words, family companies.
In Committee upstairs we eventually elicited from the Minister of State that 30 small companies were being given £500,000 relief, going back to 1966. In other words, accounts had been submitted from as far back as that year. As far as one can understand, under the law as it stood £500,000 of lax would have been payable but the Government, by this Clause, are giving the companies that amount of relief.
In Committee I moved a similar Amendment with a view to seeing just what this was all about. But it was only after the Minister of State had been asked three or four times that we eventually found out that just 30 companies were involved, that accounts had been submitted from as long ago as 1966 and that about £500,000 was involved. There may be a case for giving these 30 companies relief on accounts which have been submitted and not yet agreed, but the case was certainly not made by the Minister of State in Committee.
I should have thought that, at the very least, the House is owed an explanation when these sort of sums are being given. I know that we frequently talk about much bigger figures, but this is no small matter. No one reading the report of our debates in Committee can be under any illusion that the Minister of State gave anything other than a totally inadequate reason—indeed, he gave no reason at all—why that relief was being given.
This is a dangerous but very interesting precedent. For example, there is a case going through the courts at present which concerns a journalist's entertainment expenses, which at one time were held to be allowable as buying information. This decision was subsequently overturned and it is possible—we do not yet know: perhaps it has already been decided—that it will go to the House of Lords for a final appeal.
There may be a case for preventing, through the courts, both the Revenue and the taxpayer from spending substantial sums of money if the Government's interpretation of a particular Clause of a Finance Bill is or appears to be different from what others imagine, because for a taxpayer it is particularly onerous. When he takes a case to court and the Revenue contests it right through, from the General Commissioners to the House of Lords, not only is it very expensive but it is not even an allowable charge on his expenses.
Therefore, if the Government are now arguing that, where accounts have been submitted and there is some disagreement on interpretation, it should be a principle to bring in a new Clause in order to correctly interpret what the Government think should be the law, even if the local inspectors or anyone else—the General Commissioners or the Special Commissioners—think differently, then the Government are introducing a very interesting precedent. I would not necessarily say that I altogether disagree with it.
This is an interesting situation. I am not one of those who like the idea of taking a particular Clause of the Finance Bill and pursuing a taxpayer year after year at considerable expense, when almost literally the taxpayer cannot win, because he has to go all the way through to the House of Lords if the Revenue insists. If the taxpayer eventually wins, it is always


open to the Government to bring in a Clause to overthrow the position anyway.
We saw in another part of the Bill what happens when the Government's interpretation of a part of it—on child tax allowances—was different from the decision of the courts. An individual court had found in favour of the taxpayer, and the Government then decided to bring in a Clause. No one has disputed that the Government have that right, but it is most interesting, because from now on it could mean that no taxpayer would bring a case of this kind.
Indeed, it has always been very difficult for a taxpayer to bring a case knowing that the Revenue, if it is treated as a matter of principle, will take it right through to the House of Lords. But if it is now thought by a taxpayer that the Revenue has a particular point of view—in this case, the Government have decided in favour of the taxpayers; on another occasion they might decide the other way—all that will happen is that a Clause will be brought in so that the matter shall be interpreted precisely as the Government intended, and not as the courts decided.
Therefore, I hope that the Minister of State will at least make it clear whether there is any change in the whole system, and especially in what way they propose to pursue the general cases of the type that I have described. This case is not the same as a normal case of the sort that I have described, where a taxpayer is in dispute with the Revenue and the matter is taken through the General Commissioners right to the House of Lords.
In this case—again, we had totally inadequate information from the Minister in Committee—I understand that these accounts from these 30 companies were simply in the hands of the local inspectors of taxes and were in dispute. Cases sometimes drag on, but from 1966 to 1971 is certainly a very long time. Now, quietly, they write into the Bill this particular retrospective relief to settle the whole matter.
If we had not queried the matter in Committee that would have been the end of it. Even when we did raise it, if we had simply left it to the Minister's reply, we still would not have known. It is only because my hon. Friend the Member for West Lothian (Mr. Dalyell) and I

pursued the Minister of State at great length time after time that we eventually elicited not the reason why they had done it but at least what they had done.
This whole matter is totally unsatisfactory. I hope that the Minister of State will be able to give us a better reply today than the non-reply that he gave us in Committee.

The Minister of State, Treasury (Mr. Terence Higgins): I certainly welcome this opportunity to clarify the position. After our discussion in Committee, which seemed to me to give rise to some misunderstandings, I considered writing to the hon. Member for Heywood and Royton (Mr. Barnett) about it, but it seemed better that this matter should be raised on the Floor of the House, so that we could go into it in more detail.
I should explain that Amendments Nos. 27 and 85 do not implement the point which the hon. Gentleman is seeking to make. They raise other and rather narrower issues. Of course, if he wants me to pursue the Amendments in the strict terms in which they are drafted, I should be glad to do so, but I think that the House would prefer that I should instead take up his basic point.
When we discussed this matter in Committee the hon. Member for Heywood and Royton and the hon. Member for West Lothian (Mr. Dalyell) quite rightly wished to probe the particular situation. It was in no sense of reluctance that I gave any of the information that I gave, but I may not have spelled out the position as clearly as I might have done. As the hon. Gentleman pointed out, some of the events at issue here date back to 1966, and thus cover the period of the previous Government—the hon. Member's Government—as well as that of the present Government. It might be as well, therefore, if I were to recount the position as clearly as I can.
There was one respect in which I may have inadvertently misled the Committee; in suggesting that these accounts had been kept open since 1966 as if this were a deliberate action from that date. That, as I shall explain, has not been the position. They have been open and were open in the initial period because of the normal mechanics of the Clause with which we are concerned.
As the hon. Member for Heywood and Royton pointed out, a considerable time


has elapsed since 1966. It is reasonable, therefore, to ask why there has been such a considerable lapse of time before any action has been taken on this and why, as I sought to explain in Committee, we believe this change should be made.
I wish to make it clear that the retrospection applies to companies whose liability has not yet been finally determined. Whether or not they have submitted their accounts is immaterial, and I mention this because in Committee the hon. Member for Heywood and Royton seemed to make the point turn on the submission of the accounts rather than on whether the assessment had been determined.
We are concerned here with the position of shortfall appertaining to financial concerns whose stock in trade, so to speak, is money. I will recount the history of the case as far as possible, because it covers a considerable period. Formal representations on the treatment for shortfall of income which financial concerns derive from their investments were first made by the British Insurance Association on 25th April, 1969. The gist of the Association's complaint was that the approach to the treatment of insurance companies for shortfall varied from one inspector to another. The Association urged that all income from investments received by insurance companies should be treated as trading income, and it took the view that this could be done within existing legislation.
At the time when the representations were made, only one of the British Insurance Association's members on whose behalf they were made had suffered shortfall assessments for the years 1967–68 and 1968–69. This was a relatively small concern. In July, 1969, after a meeting with the B.I.A. at which the representations were discussed, instructions were issued to inspectors to submit to head office all cases of close companies carrying on a bona fide insurance business or the business of a bank or financial concern where, first, there was income from investments of the sort which would now qualify under Clause 22(3), and, secondly, where the required standard exceeded 60 per cent. of distributable income. These cases were to include any in which shortfall assessments had already been made.
As a result of these instructions, in addition to the 17 B.I.A. members on

whose behalf representations had been made, there were submitted three cases of insurance companies, six of banks and 10 of other financial concerns, a total of 36.
Shortfall assessments had been made in only one case and the remainder were still open—open in the sense that accounts had not yet been submitted or that the inspector was questioning the extent of the requirements of the business. In 14 of them it looked as though the required standard would be above 60 per cent.—that there would be benefit from remedial legislation of the kind now contained in Clause 22.
It follows that since April 1969 members of the B.I.A. will have been aware that action over shortfall has been suspended pending review of the treatment of investment income.

Mr. Tam Dalyell: Mr. Tam Dalyell (West Lothian) rose—

Mr. Higgins: I will give way to the hon. Gentleman later. This is a somewhat complex point and I wish to complete my remarks on this aspect.
As I was saying, they will have been aware that action over shortfall has been suspended pending this review. Before then, however, there was no question of holding up assessment or collection of shortfall while the treatment of investment income was reviewed. I repeat what I said in my opening remarks, that I may inadvertently have misled the Committee upstairs inasmuch as I suggested that the position had been deliberately kept open since 1966. That was not the case. It so happens that the position was open.
The reasons for the failure to settle shortfall for any financial concern before 1969 were various. In some cases there were delays in submitting accounts. In others it was proving difficult to reach agreement on the quantum of business requirements. I fully understand the point made by the hon. Member for Heywood and Royton about there seeming to have been a considerable delay. However, on reflection he may feel that such a point is open to a good deal of argument because, among other things, the law allows companies 18 months in which to pay dividends to avoid shortfall, and there was only a limited period, from the coming into force of the shortfall legislation in April, 1966, to about the end of 1967, in respect of which assessments


to shortfall could have been made before progress was suspended in July, 1969.
4.15 p.m.
If the position of these companies had not been held in suspense since 1969, it is possible that some of these cases would have been settled by now and that others might have gone to appeal. I understand, however, that the treatment of the investment income of financial concerns has been formally under consideration only since 1969. The House will appreciate that I am in some difficulty here because, as I say, it falls within the period of the Labour Government. However, for other reasons, shortfall had not been finally determined in any of these cases before the 1969 standstill was imposed.
In response to the question which the hon. Member for Heywood and Royton asked in Committee, about not only whether the provisions were retrospective and excessive but also discriminatory in the sense that some final decision had been made for some companies and not for others, as I understand the position, and to the best of my knowledge—one would expect the Revenue to have heard of any such cases if any had arisen—there is no discrimination in the sense that the companies which fall into this category are in the situation where the shortfall liability had not been finally determined. Thus, on the question of discrimination, as far as I am aware it does not arise. I hope that my remarks have clarified the position, at least from the point of view of the chronology of the circumstances.

Mr. Barnett: I believe that there has been one case.

Mr. Higgins: We are in some difficulty because we are not in Committee and it is, therefore, not possible to jog back and forth making and answering points. The hon. Member for Heywood and Roy ton says from a sedentary position that there has been one case. I think he has in mind the case to which I referred earlier, and I do not believe that it would be affected by the change which we are discussing. I repeat that to the best of the Revenue's knowledge no discrimination is involved because all the companies in this group are in the same position.

Mr. Dalyell: What sort of reasons were given to the inspector by these companies for the delay, which seems to have been inordinate?

Mr. Higgins: That was my reaction initially. I, too, thought there had been a very long delay. However, the hon. Gentleman will recall that there was some delay before the provisions came into effect. There was a further delay, to which I referred, in relation to the period within which action may be taken by a company which would alter the position from the shortfall point of view. There was then the whole question of the necessary needs of the business, a point which must affect the final determination. For, say, a substantial insurance company, the question of what the actual needs of the business will be can be difficult to determine and may take a considerable time to determine. I shared the hon. Gentleman's initial reaction. However, in view of the various factors I have enumerated I am sure that he will understand that in this respect there was a very considerable delay. I am sorry that I did not in Standing Committee give the whole history, but I hope that I have now satisfied the hon. Gentleman and his hon. Friends, on the question of retrospection.
There was also some confusion about the precise position of the companies with which we are concerned. Basically, there are two categories of companies—the trading company and the investment company, and we must quite clearly distinguish between them. The investment company may be a straight money box, and in that sense there may be a case for more stringent shortfall conditions. That will be common ground between us.
The group with which we are concerned comprises companies which are trading companies, but it so happens that their stock in trade is, so to speak, money, investments, and the like. Again, I think that it will be common ground between us that those companies should be treated as trading companies rather than investment companies to which more stringent shortfall conditions would apply. If that is so, it seems to us wrong to assess them on the basis of the years which remain open.
There is here no element of discrimination. It is a question, effectively,


of treating a trading company as a trading company, rather than as an investment company merely because its stock in trade happens to be money or investments. So what we get, in effect, is a company whose position needs redefining in a way that I think has always been common ground between us in regard to the operation of this part of the law.
I welcome the opportunity to clarify these points. We have here a complicated and in some ways unusual tale, so I thought it right to give the House a full explanation.
The hon. Member for Heywood and Royton asked in Standing Committee whether there was not some other element of retrospection, so to speak, either side of Budget day, and why we have chosen a particular date in the Bill. If the hon. Gentleman wishes it, I will gladly pursue the exact wording of his present Amendment and the comparatively minor point about why we have chosen this date. The provision to which the Amendments relate does not contain an element of retrospection. Unlike the Amendment, it seeks to give a fair measure of relief in periods of an accounting period that fall either side of Budget day. However, that was not the hon. Gentleman's main point in Committee, and I hope that I have been able to satisfy him on the substance of the point he has now made.

Mr. John Cronin: Before the Minister of State sits down, one point rather puzzles me. We are here dealing with a rather minute question of fiscal administration giving 30 companies only some preferential treatment. Would it not have been possible for the hon. Gentleman to have dealt with this administratively in his Department, instead of inserting a Clause in the Bill and having this rather complicated discussion?

Mr. Higgins: These companies are not being given any preferential treatment. Further, I hope that the House will agree, particularly given the Public Accounts Committee's interest in such matters, that if such a change as this is to be made at all it is right and proper that it should be put in the Finance Bill, when it can be probed, as it has been rightly probed by hon. Members opposite. I fully appreciate what the hon.

Member for Heywood and Royton felt about the precise content. These are quite complex matters, and I hope that my answer will help the House.

Mr. Dalyell: I was perhaps a little churlish yesterday on the subject of L.P.G., but today I should like to express appreciation for the great trouble to which the Minister of State has gone. I am a great deal clearer now, at 4.30 in the afternoon, than I was in the Standing Committee some hours after midnight. Until the hon. Gentleman explained the position, I had imagined that the accounts had been kept open since 1966.
I must say to my hon. Friend the Member for Loughborough (Mr. Cronin) that although to someone coming now into our debates this may seem a minor point, and that dealing with it is perhaps a bit of an abuse of our time, it did not look quite so minor a point in Committee. It is the purpose of the Finance Bill to enable the Government to be explicit on just this kind of matter.
That being so, I feel justified in asking two questions. First, what has the Treasury learned about this whole problem of retrospection in such matters? Is anything to be done differently as a result of our discussion? Secondly, the Minister of State referred to variations in treatment between one inspector and another. This is a potential problem, because one appreciates that inspectors in one office can come to a different though equally legitimate conclusion from that reached by inspectors in another office. Has the Treasury any policy of creating a certain uniformity in these matters? This is of some consequence.

Mr. Barnett: With your permission, Mr. Deputy Speaker, and that of the House, I should like to thank the Minister for his explanation. He has obviously gone to a great deal of trouble to inform himself on the subject. I do not wish to be in any way churlish, but one of the purposes in sending part of the Bill to a Standing Committee is to discuss these technical matters. I know that the subject came up rather late then, and one of the problems in Committee, despite the length of that stage, is the difficulty of pursuing such technical aspects at one o'clock or two o'clock in the morning. Nevertheless it seems rather


a pity that, lacking a satisfactory explanation we should now have to return to the subject on the Floor of the House.
I entirely accept the Minister of State's remarks on the general question of interpretation and on treating these companies as trading companies. I am clear now that as a result of the Clause, the Government's interpretation of what should be classed as trading income and what should be classed as investment income will go rather wider in future.
4.30 p.m.
The hon. Gentleman said that there is no discrimination. I accept that there is none as between companies. But there clearly has been discrimination as between companies and partnerships. In a similar sort of matter, it was found against the companies in the case of Bucks v. Bowers. The hon. Gentleman says that this is a different matter, but that was not a terribly dissimilar case. It was a case of treating trading income as investment income, I should have thought. I hope that on some other occasion the Minister of State will tell us the Government's approach and general attitude towards allowing cases to go through the courts at great length and at great expense both to the taxpayer and to the Inland Revenue. Clearly, it would be of enormous interest.
One should declare an interest here, and I am interested because it would help many of my colleagues outside the House, in advising clients, to know whether or not the Government intend to introduce legislation in other matters where there is any misunderstanding. Where the Inland Revenue goes through the normal procedure of making assessment but a misunderstanding arises will the Government decide to save everyone expense and trouble by introducing a Clause to settle the matter? I am sure that most taxpayers and their advisers, particularly if the matter worked out as happily as this one, would like to know if the Government intended to legislate to clarify such situations. Of course, that clarification might be in the opposite sense of what they might have liked it to be, but at least they would get certainty. It is very expensive for a taxpayer to take a case against the Inland Revenue to the House of Lords. Most taxpayers cannot do it and have to accept the assessment. I

would like the hon. Gentleman to reply to this point. Not only I but many people outside would like to know if there is a change of policy by the Government in this regard.

Mr. Deputy Speaker (Miss Harvie Anderson): Order. I appreciate the hon. Gentleman's efforts, but they are extending beyond the scope of this Amendment. I hope that he will not extend them any further.

Mr. Barnett: With respect, Mr. Deputy Speaker, I do not think that I am extending it. An important point of principle is involved. The cases we are talking about are cases that could have been settled, without this Clause, by normal procedure. It was decided, for reasons we have been given, not to do so. Surely that is relevant—probably more relevant in general principle than it is in the narrow case affecting a small number of companies. However, I leave the matter there. Perhaps the hon. Gentleman can enlighten us as to any change of policy.

Mr. Higgins: I am clearly somewhat inhibited by your intervention, Mr. Deputy Speaker, but perhaps I can enlighten the hon. Gentleman the Member for Heywood and Royton (Mr. Barnett). There is nothing new in legislating to give relief retrospectively. There are a number of precedents. I would be going wider than the Amendment if I did more than mention this in general terms.
The hon. Member for West Lothian (Mr. Dalyell) asked me to go very wide indeed and to discourse on what, if anything, the Treasury had learned in this matter. Only on the point of the inspectorate should I say anything. My hon. Friend the Financial Secretary was involved and his memory is better than mine and he recalls our raising this point on a Finance Bill, when the provision we are seeking to amend was first introduced. It is a position we took up then.
I am grateful to the hon. Member for Heywood and Royton for his kind remarks. I did not take unkindly to the way he pursued the matter in Committee. It is right for the Opposition, if they detect a point worth pursuing, to do so with enthusiasm. That is their function. I am sure that the hon. Gentleman is doing no less than his duty in pursuing this matter. I am equally


glad to have had this opportunity—perhaps this is the case for having both Committee and Report stages—to clarify the situation. I hope, therefore, that he will feel able to withdraw the Amendment. I will write to him on the more detailed points I have not covered.

Mr. Barnett: I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Barnett: Mr. Barnett I beg to move Amendment No. 23, in page 20, line 24 leave out subsection (2).

This, of course, goes back again to our discussions in Committee and again concerns a matter on which we had a totally inadequate reply—perhaps for different reasons because, clearly, there is a point of principle between us here. We were not able to persuade the Minister of State, despite our strong feelings. As the Clause stands, we believe that opportunities are opened up that are not open to the ordinary taxpayers. One could use the phrase which the hon. Gentleman himself has used—the opportunity to use companies as a sort of moneybox, the idea of allowing dealing companies, as they are culled, to have their investment income treated as trading income and therefore assessed as earned income for tax purposes. Clearly, this is of considerable benefit to a comparatively small number of individuals who have formed themselves into close dealing companies and take advantage of this Clause, thus creating an unfairness as between one taxpayer and another.

I do not think that we are going to be able to persuade the hon. Gentleman, since we were not able to do so when we discussed this matter at length in Committee, but I repeat that this is a quite separate point from the argument pursued a few moments ago. Then we referred to insurance companies and banks which have incidental investment income which is not their whole income or mainly their income but is only part of their normal income. Therefore, it is not unfair that it should be treated as income. Here we are talking of a different thing altogether.

The provision as it stands would create a loophole for some taxpayers to take unfair advantage and obtain considerable tax relief by setting themselves up as

a dealing company. It is for this reason that I was not satisfied with the replies in Committee, and that I wish to press the Amendment—unless, as I hope, with my blind faith in human nature and the good sense of the hon. Gentleman, he has last recognised the massive case we presented and that he was wrong not to accept our Amendment in Committee upstairs. If he accepts this Amendment, I think that we can probably leave it at that. Otherwise I must advise my hon. Friends to join me in voting for the Amendment.

Mr. Higgins: We have been discussing the philosophy of Oppositions. I suppose that for an Opposition any answer from the Government is unsatisfactory when it is short of outright acceptance of an Amendment, and even then there is sometimes a danger that accepting the Amendment will produce a situation more unsatisfactory than might have seemed likely.
As the hon. Member for Heywood and Royton (Mr. Barnett) rightly said, this issue is different from that which we were discussing a moment or two ago. In Standing Committee, a number of hon. Members, certainly the hon. Member for Heywood and Royton and the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and, in a narrower sense, the hon. Member for Dudley (Dr. Gilbert), suggested that an individual might seek to form himself into a company in such a way that there might be tax avoidance. This is clearly a matter of legitimate concern to both sides of the House.

The Amendment would exclude from the provision companies whose trade consisted wholly or mainly of dealing in securities—and this issue was raised at column 401 of the OFFICIAL REPORT of the Standing Committee. It was argued that a company which turned over a few shares could convince the Revenue that is was a dealing company and could thereby avoid the 100 per cent. maximum required standard appropriate to investment income. Dealing companies would require rather more than to turn over a few shares to convince the Revenue that their activities consisted wholly or mainly of carrying on a trade—this is covered by subsection (2)(a)—and that the trade consisted wholly or mainly of dealing


in securities, which is covered by subsection (2)(b).

There are certain statutory requirements which a dealer must satisfy if he is to be accepted as such for the purposes of the Prevention of Fraud (Investment) Act, and the Revenue would be guided by them. Moreover, the object of the subsections is to treat as trading income the income which a trading company whose stock in trade is money derives from the use of that money. Therefore, a company which deals in securities is essentially a company whose stock in trade is money and it would therefore be entitled to the benefits of these provisions.

We believe that there are adequate safeguards and certainly the Revenue feels that the matters which I mentioned a few moments ago provide adequate safeguard against avoidance of the kind which the hon. Gentleman envisages. Nothing said in Standing Committee or today would lead us to alter that view. But, as in all matters, if any hon. Member has in mind a particular device—and there is scarcely any limit to the ingenuity of those who look for new devices in these matters—no doubt he will let us know. Accountants may be better qualified in this respect than those of us who are economists and less able to become

involved in such highly complex matters in a professional capacity.

As I have given the hon. Gentleman a reasonable assurance, I hope that he will feel able to withdraw the Amendment.

Mr. Barnett: By leave of the House; I am sure that I do not need to tell the Inland Revenue the devices which it is possible to use to form a dealing company for an individual. It would be almost impossible for the Revenue to do anything about it if an individual, or two individuals together, put their shares into a small company and bought and sold those shares during the course of the year. That is a dealing company; what else is it?
Admittedly, if it turned over only one share, or two shares, in a year, the Revenue would be able to argue that it was not a dealing company. But either the hon. Gentleman is very naïve, which I do not believe, or he is prepared to accept a situation which we are certainly not prepared to accept, and for those reasons I advise my hon. Friends to divide the House.

Question put, That the Amendment be made:—

The House divided: Ayes 185, Noes 209.

Division No. 412.]
AYES
[4.44 p.m.


Abse, Leo
Cronin, John
Gordon Walker, Rt. Hn. P. C.


Albu, Austen
Crosland, Rt. Hn. Anthony
Gourlay, Harry


Allaun, Frank (Salford, E.)
Cunningham, G. (Islington, S. W.)
Grant, George (Morpeth)


Allen, Scholefield
Cunningham, Dr. J. A. (Whitehaven)
Griffiths, Eddie (Brightside)


Ashton, Joe
Dalyell, Tam
Hamilton, William (Fife, W.)


Atkinson, Norman
Davies, Denzil (Llanelly)
Hannan, William (G'gow, Maryhill)


Bagier, Gordon A. T.
Davies, S. O. (Merthyr Tydvil)
Hardy, Peter


Barnett, Joel
Davis, Clinton (Hackney, C.)
Harrison, Walter (Wakefield)


Beaney, Alan
Davis, Terry (Bromsgrove)
Healey, Rt. Hn. Denis


Bennett, James (Glasgow, Bridgeton)
Deakins, Eric
Heffer, Eric S.


Bidweill, Sydney
de Freitas, Rt. Hn. Sir Geoffrey
Hooson, Emlyn


Blenkinsop, Arthur
Dempsey, James
Horam, John


Boardman, H. (Leigh)
Doig, Peter
Hughes, Rt. Hn. Cledwyn (Anglesey)


Booth, Albert
Douglas, Dick (Stirlingshire, E.)
Hughes, Robert (Aberdeen, N.)


Bradley, Tom
Douglas-Mann, Bruce
Hughes, Roy (Newport)


Brown, Ronald (Shoreditch amp; F'bury)
Driberg, Tom
Hunter, Adam


Buchan, Norman
Duffy, A. E. P.
Irvine, Rt. Hn. Sir Arthur (Edge Hill)


Buchanan, Richard (G'gow, Sp'burn)
Dunn, James A.
Jay, Rt. Hn. Douglas



Dunnett, Jack
Jeger, Mrs. Lena (H'b'n amp; St. P'cras, S.)


Callaghan, Rt. Hn. James
Eadie, Alex
Jenkins, Hugh (Putney)


Campbell, I. (Dunbartonshire, W.)
Edwards, Robert (Bilston)
Jenkins, Rt. Hn. Roy (Stechford)


Cant, R. B.
Evans, Fred
John, Brynmor


Carmichael, Neil
Fernyhough, Rt. Hn. E.
Johnson Carol (Lewisham, S.)


Carter-Jones, Lewis (Eccles)
Fisher, Mrs. Doris (B'ham, Ladywood)
Johnson, James (K'ston-on-Hull, W)


Castle, Rt. Hn. Barbara
Fletcher, Ted (Darlington)
Johnston, Russell (Inverness)


Clark, David (Colne Valley)
Foley, Maurice
Jones, Barry (Flint, E.)


Cocks, Michael (Bristol, S.)
Ford, Ben
Jones, Dan (Burnley)


Cohen, Stanley
Forrester, John
Jones, Gwynoro (Carmarthen)


Coleman, Donald
Freeson, Reginald
Jones, T. Alec (Rhondda, W.)


Concannon, J. D.
Galpern, Sir Myer
Kaufman, Gerald


Corbet, Mrs. Freda
Gilbert, Dr. John
Kelley, Richard


Cox, Thomas (Wandsworth, C.)
Ginsburg, David
Kinnock, Neil


Crawshaw, Richard
Golding, John
Latham, Arthur




Lawson, George
Moyle, Roland
Silverman, Julius


Lee, Rt. Hn. Frederich
Murray, Ronal King
Skinner, Dennis


Leonard, Dick
O'Halloran, Michael
Small, William


Lestor, Miss Joan
O'Malley, Brian
Smith, John (Lanarkshire, N.)


Lever, Rt. Hn. Harold
Oram, Bert
Stallard, A. W.


Lomas, Kenneth
Orme, Stanley
Steel, David


Loughlin, Charles
Oswald, Thomas
Stewart, Donald (Western Isles)


Lyons, Edward (Bradford, E.)
Owen, Dr. David (Plymouth, Sutton)
Stewart, Rt. Hn. Michael (Fulham)


Mabon, Dr. J. Dickson
Paget, R. T.
Stoddart, David (Swindon)


McBride, Neil
Pannell, Rt. Hn. Charles
Strang, Gavin


McCann, John
Pardoe, John
Taverne, Dick


McCartney, Hugh
Parry, Robert (Liverpool, Exchange)
Thomas, Rt. Hn. George (Cardiff, W.)


Mackenzie, Gregor
Pavitt, Laurie
Tinn, James


Maclennan, Robert
Peart, Rt. Hn. Fred
Tomney, Frank


McMillan, Tom (Glasgow, C.)
Pendry, Tom
Torney, Tom


McNamara, J. Kevin
Pentland, Norman
Tuck, Raphael


Mahon, Simon (Bootle)
Price, William (Rugby)
Urwin, T. W.


Mallalieu, E. L. (Brigg)
Probert, Arthur
Walker, Harold (Doncaster)


Mallalieu, J. P. W. (Huddersfield, E.)
Rankin, John
Watkins, David


Marks, Kenneth
Reed, D. (Sedgefield)
Weitzman, David


Marquand, David
Rees, Merlyn (Leeds, S.)
White, James (Glasgow, Pollok)


Marsden, F.
Rhodes, Geoffrey
Whitehead, Phillip


Marshall, Dr. Edmund
Roberts, Albert (Normanton)
Willey, Rt. Hn. Frederick


Mayhew, Christopher
Rodgers, William (Stockton-on-Tees)
Williams, Mrs. Shirley (Hitchin)


Mellish, Rt. Hn. Robert
Rose, Paul B.
Wilson, Rt. Hn. Harold (Huyton)


Millan, Bruce
Ross, Rt. Hn. William (Kilmarnock)
Wilson, William (Coventry, S.)


Miller, Dr. M. S.
Sandelson, Neville
Woof, Robert


Milne, Edward (Blyth)
Sheldon, Robert (Ashton-under-Lyne)
TELLERS FOR THE AYES:


Mitchell, R. C. (S'hampton, Itchen)
Short, Mrs. Renée (W'hampton, N. E.)
Mr. James Hamilton and


Morris, Alfred (Wythenshawe)
Silkin, Rt. Hn. John (Deptford)
Mr. William Hamling.


Morris, Charles R. (Openshaw)
Silkin, Hn. S. C. (Dulwich)





NOES


Adley, Robert
Dixon, Piers
Kimball, Marcus


Alison, Michael (Barkston Ash)
Dodds-Parker, Douglas
King, Evelyn (Dorset, S.)


Allason, James (Hemel Hempstead)
du Cann, Rt. Hn. Edward
Kinsey, J. R.


Archer, Jeffrey (Louth)
Edwards, Nicholas (Pembroke)
Knight, Mrs. Jin


Astor, John
Elliot, Capt. Walter (Carshalton)
Knox, David


Atkins, Humphrey
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Lane, David


Awdry, Daniel
Eyre, Reginald
Legge-Bourke, Sir Harry


Balniel, Lord
Fell, Anthony
Le Marchant, Spencer


Barber, Rt. Hn. Anthony
Fenner, Mrs. Peggy
Lewis, Kenneth (Rutland)


Batsford, Brian
Finsberg, Geoffrey (Hampstead)
Lloyd, Ian (P'tsm'th, Langstone)


Beamish, Col. Sir Tufton
Fisher, Nigel (Surbiton)
Loveridge, John


Bennett, Sir Frederic (Torquay)
Fookes, Miss Janet
Luce, R. N.


Berry, Hn. Anthony
Fortescue, Tim
McAdden, Sir Stephen


Biffen, John
Fraser, Rt. Hn. Hugh (St'fford amp; Stone)
MacArthur, Ian


Biggs-Davison, John
Gilmour, Ian (Norfolk, C.)
McCrindle, R. A.


Blaker, Peter
Gilmour, Sir John (Fife, E.)
Maclean, Sir Fitzroy


Boardman, Tom (Leicester, S. W.)
Glyn, Dr. Alan
McMaster, Stanley


Body, Richard
Goodhart, Philip
Macmillan, Maurice (Farnham)


Boscawen, Robert
Goodhew, Victor
McNair-Wilson, Patrick (NewForest)


Bossom, Sir Clive
Gorst, John
Maddan, Martin


Bowden, Andrew
Gower, Raymond
Madel, David


Braine, Bernard
Gray, Hamish
Maginnis, John E.


Brinton, Sir Tatton
Green, Alan
Marten, Neil


Brocklebank-Fowler, Christopher
Grieve, Percy
Mather, Carol


Brown, Sir Edward (Bath)
Gummer, Selwyn
Maude, Angus


Buchanan-Smith, Alick (Angus, N amp; M)
Hall, Miss John (Keighley)
Mawby, Ray


Bullus, Sir Eric
Hall, John (Wycombe)
Meyer, Sir Anthony


Burden, F. A.
Hall-Davis, A. G. F.



Butler, Adam (Bosworth)
Hamilton, Michael (Salisbury)
Mills, Peter (Torrington)


Campbell, Rt. Hn. G. (Moray amp; Nairn)
Harrison, Col. Sir Harwood (Eye)
Mills, Stratton (Belfast, N.)


Cary, Sir Robert
Haselhurst, Alan
Mitchell, Lt. -Col. C. (Aberdeenshire, W.)


Channon, Paul
Hastings, Stephen
Mitchell, David (Basingstoke)


Chataway, Rt. Hn. Christopher
Havers, Michael
Moate, Roger




Molyneaux, James


Chichester-Clark, R.
Hayhoe, Barney
Monks, Mrs. Connie



Hawkins, Paul



Churchill, W. S.
Hicks, Robert
Montgomery, Fergus


Clark, William (Surrey, E.)
Higgins, Terence L.
More, Jasper


Clarke, Kenneth (Rushcliffe)
Hill, James (Southampton, Test)
Morgan, Geraint (Denbigh)


Clegg, Walter
Halt, Miss Mary
Morgan-Giles, Rear-Adm.


Cooke, Robert
Hordern, Peter
Morrison, Charles (Devizes)


Coombs, Derek
Hornsby-Smith, Rt. Hn. Dame Patricia
Murton, Oscar


Cooper, A. E.
Howe, Hn. Sir Geoffrey (Reigate)
Nabarro, Sir Gerald


Cordle, John
Howell, David (Guildford)
Normanton, Tom


Corfield, Rt. Hn. Frederick
Howell, Ralph (Norfolk, N.)
Nott, John


Cormack, Patrick
Hunt, John
Oppenheim, Mr. Sally


Costain, A. P.
Hutchison, Michael Clark
Owen, Idris (Stockport, N.)


Crouch, David
Irvine, Bryant Godman (Rye)
Page, Graham (Crosby)


Curran, Charles
Jenkin, Patrick (Woodford)
Page, John (Harrow, W.)


Davies, Rt. Hn. John (Knutsford)
Kellett-Bowman, Mrs. Elaine
Parkinson, Cecil (Enfield, W.)


d'Avigdor-Goldsmid, Sir Henry
Kershaw, Anthony
Percival, Ian


d'Avigdor-Goldsmid, Maj.-Gen. James
Kilfedder, James
Pike, Miss Mervyn







Pounder, Rafton
Speed, Keith
van Straubenzee, W. R.


Price, David (Eastleigh)
Spence, John
Vaughan, Dr. Gerard


Pym, Rt. Hn. Francis
Sproat, Iain
Vickers, Dame Joan


Raison, Timothy
Stainton, Keith
Waddington, David


Rawlinson, Rt. Hn. Sir Peter
Stanbrook, Ivor
Walker, Rt. Hn. Peter (Worcester)


Redmond, Robert
Stewart-Smith, D. C. (Belper)
Wall, Patrick


Reed, Laurance (Bolton, E.)
Stodart, Anthony (Edinburgh, W.)
Walters, Dennis


Rees, Peter (Dover)
Stokes, John
Ward, Dame Irene


Rees-Davies, W. R.
Stuttaford, Dr. Tom
Warren, Kenneth


Renton, Rt. Hn. Sir David
Tapsell, Peter
Whitelaw, Rt. Hn. William


Ridley, Hn. Nicholas
Taylor, Sir Charles (Eastbourne)
Wiggin, Jerry


Ridsdale, Julian
Taylor, Edward M. (G'gow, Cathcart)
Wilkinson, John


Rossi, Hugh (Hornsey)
Taylor, Robert (Croydon, N. W.)
Wolrige-Gordon, Patrick


Russell, Sir Ronald
Tebbit, Norman
Woodhouse, Hn. Christopher


Sandys, Rt. Hn. D.
Thompson, Sir Richard (Croydon, S.)
Worsley, Marcus


Scott-Hopkins, James
Tilney, John
Wylie, Rt. Hn. N. R.


Sharples, Richard
Traftord, Dr. Anthony



Shaw, Michael (Sc'b'gh amp; Whitby)
Trew, Peter
TELLERS FOR THE NOES:


Shelton, William (Clapham)
Tugendhat, Christopher
Mr. Hector Monro and


Skeet, T. H H.
Turton, Rt. Hn. Sir Robin
Mr. Bernard Weatherill.


Soref, Harold

Clause 23

REPLACEMENT OF BUSINESS ASSETS

The Financial Secretary to the Treasury (Mr. Patrick Jenkin): I beg to move Amendment No. 28, That Clause 23 be transferred to the end of page 48, line 35.
This was a Clause, moved by my hon. Friend the Member for Birmingham, Yardley (Mr. Coombs), which the Government felt able to accept. It would more appropriately find its place in the Bill in Part IV rather than in Part II where it now appears. The Amendment has the effect of transferring it to Part IV.

Amendment agreed to.

Clause 27

EXCEPTIONS FROM SECTION 26

Mr. R. Chichester-Clark: I beg to move Amendment No. 31, in page 27, line 33, at end insert:
(10) Before making any regulations under sections 26 or 27 of this Act, the Board shall consult with such persons or organisations as appear to them to be representative of employers and trade unions in the construction industry.
This is an important Amendment. I think I can earn the gratitude of the Committee by disposing of my side of the argument within a couple of minutes, although I felt rather less than grateful after being kept waiting until a quarter to One last night to move the Amendment only to find that my Front Bench had packed their bags and fled.
This Amendment is self-explanatory, and deals with practical matters concern-

ing both sides of the building industry. My hon. Friend the Financial Secretary should try to give us some of the assurances implicit in the questions which the Amendment asks.

Mr. Patrick Jenkin: I express the apologies of myself and my hon. Friends that my hon. Friend the Member for Londonderry (Mr. Chichester-Clark) had to sit here last night and was not able to move his Amendment. However, he has been able to do so this afternoon and I welcome the commendably brief way in which he did it. The Amendment deals with "the lump", charging to tax those self-employed sub-contractors in the building industry, where there has been a good deal of evasion in recent years. The Amendment would require the Board of Inland Revenue to consult representatives of both sides of the construction industry before making regulations necessary to implement the legislation contained in the Bill. As I am sure my hon. Friend knows from his great experience of these matters, it is the normal custom to consult interests directly affected before regulations on administrative matters are finalised, even where there is no requirement spelt out in the legislation.
The Inland Revenue has already assured the National Federation of Building Trades Employers and the Federation of Civil Engineering Contractors that it will show them and other appropriate bodies copies of the draft regulations before they are laid. The Amendment refers to the trade unions and here again I can say that although by definition the trade unions have no direct interest in the legislation, since employees are not concerned—we are here concerned with


so-called sub-contractors—it is the intention of the Board of Inland Revenue to let the trade unions see the draft regulations as a matter of courtesy.
I urge the House not to insist on the inclusion in the legislation of an obligation to consult in those circumstances. There are many other instances, in the Income Tax Acts and other legislation, where Governments as a normal course will consult without there being any statutory obligation. If we begin to insert into the legislation an obligation to consult it would cast doubt on whether it is appropriate to consult in the other cases. I hope that my hon. Friend, having heard the undertakings I have been able to give on behalf of the Inland Revenue, will feel it unnecessary to press the Amendment.

Mr. Eric S. Heffer: I am sorry that the hon. Member for Londonderry (Mr. Chichester-Clark) did not develop his case further, because when I looked at the debates which took place on "the lump" in Committee it seemed that they were very unsatisfactory. The problem is not really being dealt within the Bill. Here we are attempting to close a loophole in terms of taxation, but we are not tackling the matter from the point of view of the National Insurance contributions and other aspects which are equally as important.
The Financial Secretary has dodged the issue of "the lump". In the last Parliament the Labour Government had a very clear policy on this issue and presented a Bill which was supported by hon. Members opposite.

Mr. Chichester-Clark: It is true that i did not express condemnation of that Bill, but I criticised it and said that in certain circumstances I would withdraw support from it. If I were to go any further—and I think that I have already gone too far, as probably the hon. Gentleman has done—I should be out of order because the question whether "the lump" has been effectively dealt with in the Finance Bill cannot arise on this Amendment.

5.0 p.m.

Mr. Heffer: Whether or not the hon. Gentleman thinks that it cannot arise on this Amendment, we are essentially dealing with this point. The Financial Secre-

tary said that the question of "the lump" was being dealt with. We are here concerned with sub-contracting; that is what it is all about. It is no good the hon. Gentleman saying that although he supported the Labour Government's Bill he was critical of it. It is one thing to be critical of a Bill; it is another thing to be in opposition to it. If we are in opposition to a Bill, we vote against the Second Reading and Third Reading.

Mr. Chichester-Clark: At the time. I had introduced a Bill which would have been infinitely more preferable.

Mr. Heffer: The hon. Gentleman cannot get away with that, because he introduced a Bill only to embarrass the Labour Government and to get them to speed up their Bill. I was in favour of getting the Bill through as quickly as possible. This underlines my point that now that the then Opposition are in Government they have totally abandoned the concept of a Bill, whether it was the Labour Government's Bill or the Bill introduced by the hon. Gentleman. The proposals in the Finance Bill do not adequately deal with the situation.
I wish to know why the Financial Secretary opposes the Amendment. I cannot see anything wrong with it. It seems reasonable to me. I do not know whether the hon. Gentleman thinks that saying that the regulations will be shown to the employers' federation and to the trade unions deals with the point. Showing them regulations does not necessarily mean consultation. It is possible to show somebody something and say, ''This is what we are doing" and then go ahead and do it irrespective of what he says. Is that what the hon. Gentleman is saying, or is he saying that he will allow the unions and the employers' federation to put forward their points of view and will take them into consideration before the regulations are introduced?

Mr. Patrick Jenkin: I can answer the hon. Gentleman's question with a categorical "Yes".

Mr. Heffer: Then I do not understand why the hon. Gentleman does not accept the Amendment, because it is not a bad idea to have it written into the Bill to make the point specific. However, I shall not pursue the matter except to say that these Amendments are inadequate to


deal with the situation, and the hon. Member for Londonderry knows that as well as I do. He has raised the matter in this way because there is no alternative to dealing partially with the question of "the lump" and because there are all sorts of tax evasion as a result of "the lump".
I hope that the Government will not leave the matter as it is but that they will pursue it further and will introduce a comprehensive Bill dealing with the question of "the lump" and will eliminate this extremely bad practice in the building industry. It is time that "the lump" was eliminated from the industry. I realise that we cannot obtain complete satisfaction from the occupants of the Treasury Bench, because this is not their pigeon. They have wrongly been given the job. That is why the matter is being dealt with in a half-hearted way. It should be dealt with in a comprehensive Bill and "the lump" sub-contracting needs to be outlawed.

Mr. Raymond Gower: I hardly think that the Finance Bill is an appropriate medium by which to accomplish the aims of the hon. Member for Liverpool, Walton (Mr. Heffer).

Mr. Heffer: I have just said that.

Mr. Gower: No. He said that this method was inadequate in the context of the Bill. I should have thought that this was a most inappropriate medium for putting in order what the hon. Gentleman regards as malpractices in the construction industry. A different medium is required for that purpose.

Mr. Charles Loughlin: It is not we on this side of the House who say that this Bill will cure the problem of "the lump". It was said from the Government Front Bench that this was a method by which they would do it.

Mr. Gower: My point is that this is not an appropriate medium to accomplish the aim, but what we are discussing represents a useful part of that job in the context of this Bill, and I should have thought that it would be welcomed by the Opposition.
Ostensibly, what my hon. Friend the Member for Londonderry (Mr.

Chichester-Clark) has proposed seems a good idea, but I think he will agree that if we specify the people to be consulted it may suggest that nobody else need be consulted. To that extent, my hon. Friend the Financial Secretary is on fairly solid ground. However, I wonder whether he could go a little further. I was not sure whether his undertaking extended as far as consultation. I imagine that we would not require the Amendment to be inserted in the Bill provided that what was done by the Revenue amounted to consultation.

Mr. Patrick Jenkin: With leave, I should like to respond to the further points which have been made.
I intervened in the speech of the hon. Member for Liverpool, Walton (Mr. Heffer) to give a categoric "Yes" to his question. I think that he accepted that I meant that there would be genuine consultation. I can reassure my hon. Friends on that point. There would be no point in the Inland Revenue or any other Government Department showing regulations in draft to trade associations and trade unions if it did not avail itself of the advice which it might receive on them. But consultation does not oblige a Government Department to comply with the advice it is given. However, that it should seek advice and take it into account with an open mind is usually accepted and is appropriate in this instance.
I reinforce the point made by my hon. Friend the Member for Barry (Mr. Gower) that if we specify matters in the Bill it tends not only to have a restrictive effect as to whom should be consulted—circumstances change and legislation must stand for a number of years—but also to cast doubt on the desirability of consulting in other instances when comparable provisions do not apply. I therefore reassert my earlier advice that, on the whole, it would be preferable not to include these Amendments in the Bill. I am grateful to my hon. Friend the Member for Londonderry (Mr. Chichester-Clark) for giving me the opportunity to state quite clearly that it is the intention of the Inland Revenue to consult the interests I have named.
The hon. Member for Walton mentioned National Insurance. His hon


Friends raised this question, very properly and fully, in Committee on 14th June, and I would refer the hon. Gentleman to what I hope he will regard as a reassuring answer which I gave in col. 436–7. I should probably be straying beyond the rules of order if I were to say more about that now.
We believe that these Clauses will go a long way to cure the ills which have beset the building industry from the growth of bogus self-employed sub-contractors. We intend to watch this, and my hon. Friend the Under-Secretary of State for the Environment sat in Committee throughout the debates upstairs and listened to all the points made. The Government intend to watch the situation closely, and, if any further steps are necessary to cure what all sides have agreed is a thoroughly undesirable development in the building industry, we shall consider whether such steps should be taken. By tackling the tax evasion that has gone on through this method we shall be hitting at a peculiarly sensitive point and, if we can deal with this effectively, I believe that we shall succeed in making a considerable dent in this practice.

Mr. Heffer: Would not the hon. Gentleman agree that an even better way of underlining the points he has made would be to accept the Amendment of my hon. and learned Friend the Member for Lincoln (Mr. Taverne) to the effect that there should be a register of such subcontractors to make it easier to deal with the matter?

Mr. Jenkin: The Government considered this most closely but came to the conclusion that this would undoubtedly have led to a cumbrous and bureaucratic procedure. After the most careful consideration, we felt that a register was not the best way of doing it. I do not rule it out for all time. It may be that we shall be driven to it if we find that the measures we have taken so far, the measures which my right hon. Friend the Secretary of State for Social Services is contemplating in relation to National Insurance and other measures which are open to us do not deal with the problem. We may then have to reconsider the question of a register, but we shall do so with the greatest possible reluctance.

Mr. Costain: Does my hon. Friend appreciate that "the lump" grew at a more rapid rate when S.E.T. was introduced, and the halving of S.E.T. will help to reduce it?

Mr. Jenkin: I entirely accept my hon. Friend's point, but I equally accept the point made by the hon. Member for Walton in an intervention in a speech I made in the Budget debate when he said that "the lump" existed before the introduction of S.E.T., although there is not the slightest doubt that S.E.T. has exacerbated the problem.
Having heard the explanations and assurances which I have given, I hope that my hon. Friend will feel it right to withdraw the Amendment.

Mr. Loughlin: I am surprised at the turn of events in this debate. The Amendments are so narrowly drawn that I did not realise—perhaps because of my inexperience—that we could talk about the lump and relate the Clause to it. I should be abusing your tolerance, Mr. Deputy Speaker, if I were to develop the case that has been presented by the Financial Secretary.
It is true that the hon. Member for Londonderry (Mr. Chichester-Clark) attempted at all stages to qualify his support for the Bill presented by the Labour Government, but I remind him that there was agreement between both sides of the Committee to get the Bill through in four sittings. That indicates at least some measure of approval and support for the Bill.
On the intervention made by the hon. Member for Folkestone and Hythe (Mr. Costain), all the evidence that was submitted to the Phelps Brown Committee was collated before the introduction of S.E.T. The problem was acute before the Phelps Brown Committee sat, but it was accelerated by the introduction of S.E.T.
This provision will not touch "the lump". I am delighted that the Financial Secretary has said that if the Government find it does not touch it they are prepared to reconsider the position and introduce legislation to deal with "the lump". I take it that this is an official promise. It is on the record, and I hope that the promise will be carried out. This Clause will not deal with "the lump", and if the


Government take steps to deal with it I shall be highly delighted.

5.15 p.m.

Mr. Jenkin: If I may intervene, I did not go on record as saying that. The hon. Member and I can both examine the record tomorrow. I said that we should be prepared to consider it to see whether further steps would be necessary. I gave no undertaking to take any specific action.

Mr. Loughlin: I shall be interested to see HANSARD tomorrow. At least I have given the hon. Gentleman the opportunity, if he inadvertently said something which he should not have said, to correct it. I am sorry that his promise is not stronger than it appears to be.

Mr. Chichester-Clark: I find the speeches of the hon. Member for Gloucestershire, West (Mr. Loughlin) somewhat of an acquired taste, and my process of acqusition has not gone very far this afternoon. What he said was not very helpful to the case.
I am much appeased by what my hon. Friend the Financial Secretary said and I am pleased that something is being done to tackle this problem. My hon. Friend the Member for Folkestone and Hythe (Mr. Costain) and I were pioneers in this subject. Until we introduced a Bill to get something done, we could not get the Labour Government to do anything. With those few observations, and welcoming what my hon. Friend said, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 29

INCOME TAX CHARGED AT BASIC AND OTHER RATES

Mr. David Marquand: I beg to move, Amendment No. 34, in page 29, line 8, leave out paragraph (a) and insert:


(a) in respect of earned income at such rate, to be known as basic rate, and in respect of investment income at such rate, to be known as the basic investment rate, as Parliament may determine; and.

Mr. Deputy Speaker (Miss Harvie Anderson): I think it would be for the

convenience of the House to discuss also the following Amendments:

No. 35, in page 29, line 14, leave out from beginning to end of line 18.

No. 37, in page 32, line 32, after 'basic', insert 'investment'.

No. 38, in page 33, line 10, leave out '30' and insert '20'.

No. 39, in page 33, line 11, at end insert:
'and the basic investment rate shall be 38·75 per cent.'.

Mr. Marquand: Our purpose in putting down these Amendments is two-fold. First, we hope that even at this rather late stage it will be possible to persuade the Government to be more forthcoming than they have been hitherto about the way in which they intend to operate the Clauses to which these Amendments refer. Secondly, we believe that although the new system of personal taxation set out in these Clauses is in some respects a step forward in comparison with the present system, it is a step backwards in other respects. We believe that our Amendments would retain the advantages proposed by the Government while at the same time eliminating the disadvantages. I should like to say something about both these reasons.
1 turn first to the question of information. There is wide agreement on both sides of the House, and indeed among an increasing number of outside commentators, that the House of Commons should be given more information than it has had in the past if it is properly to discharge its traditional function as the watchdog of the executive in economic and taxation matters. Both Governments have gone a long way to meet this point of view. The previous Government introduced a major change with the publication of the White Paper on expenditure. This Government carried that change further by setting up the Expenditure Committee, by publishing the two Green Papers on corporation tax and the value-added tax, and by setting up a Select Committee on corporation tax.
I would be the first to pay tribute to the Chief Secretary for the Government's innovations in this matter. But the very fact that the present Government, like their predecessors, have been more forthcoming than used to be the case in


matters of this kind makes it all the more disappointing that in this and subsequent Clauses, which introduce a revolutionary change into the whole system of personal taxation, they have been so cagey about their precise intentions.
We accept that the Chancellor of the Exchequer cannot be expected to tell us in 1971 how he intends to manage the economy in 1973. No one expects a precise statement of the rates and levels of taxation which he intends to introduce in 1973, but I cannot see why the Chancellor of the Exchequer is unable to say approximately how large the slice of investment income which is to be charged at the earned income rate is to be, and at least approximately how great will be the differentiation between the earned income rate and the investment income rate.
In the debates in Committee which were taken on the Floor of the House, the Treasury Ministers explained their inability to give us this information as follows. The Financial Secretary said on 18th May:
It would not have been possible for any Government to have undertaken the major administrative work that needs to be done and, at the same time, to have announced the rates. It is because one must do it in stages, and therefore inevitably introduce legislation in one year and in the subsequent year announce the rates, that it has become possible to do it, and this is the price one must pay for doing it.
In other words, he implied that the reason the Government were unable to say how large the slice was to be and how great the differentiation between earned and investment income was an administrative reason. There was some obscure administrative obstacle which prevented him disclosing that information to the House. But he did not say what the obstacle was.
Later, the hon. Gentleman gave a different reason. He implied that he was reluctant to divulge this information, not on administrative grounds but because of the need for flexibility in matters of demand management. He said later in the same speech:
In this scheme the reform has such an impact on demand management that it would have been impossible for my right hon. Friend in any sense to have committed himself as to the higher rates of tax, the starting point for the investment income surcharge or the

level of surcharge."—[OFFICIAL REPORT, 18th May, 1971; Vol. 817, c. 1125.]
But the basic rate for earned income also has a major significance for demand management—indeed, I would have thought it had much greater significance for demand management—yet the basic rate for earned income is spelt out in the Bill. It is to be 30 per cent. The Chancellor has said that his commitment to 30 per cent. is not inflexible and that in 1973, when he enacts the changes foreshadowed here, he may have to vary the rate according to the circumstances prevailing at that time. If it is possible for the Chancellor to say that the basic rate for earned income is to be 30 per cent., subject to the proviso that it may have to be changed to a different figure at a later stage if the economic circumstances dictate such a change, why cannot he do the same for the surcharge rates? What is the difference between the two?
Even if it is impossible for the Chancellor to say what the rate is to be for investment income, I cannot see why it is impossible for him to say what the size of the slice is to be. If he were to tell us the size of the slice without telling us the extent of the differentiation in rates, he would disclose nothing that might impede flexibility in demand management, yet it would give us an opportunity to judge the significance of the proposals in the Bill a great deal more thoroughly than we have been able to do in debates on Second Reading and in Committee.
The size of the first slice of investment income which is to be exempted from surcharge makes a major difference to the new system and to our attitude to it. If the first slice is to be large, then in our view it suggests that the Government will eventually be driven along the path which many of their own supporters wish to force them to pursue towards complete abolition of the distinction between earned and investment income. In our view that would be an intolerable path to tread and we would oppose it utterly. On the other hand, if the first slice of investment income were very small, and if the reason for exempting small investment incomes were simply an administrative one, we should perhaps have some doubts about it; but our opposition would not be anything like as passionate. This makes a major difference to our attitude to this


whole chapter of the Bill, and it is very unfortunate that the Government so far have been so cagey about their intentions. I hope that the Chief Secretary, whose record on the question of opening up Treasury operations to the public gaze has been remarkable, will feel able in his reply to be a little more generous in regard to the information which he and his colleagues are able to give.

Mr. Gower: Does the hon. Gentleman not feel that the formula in the Amendment is somewhat inconsistent with his last point about equalising rates when he suggested that some supporters of the Government wanted the same rate for investment income as the basic rate?

Mr. Marquand: As I was seeking to argue, it depends on how large the first slice is. Let us suppose, for the sake of argument, that the first slice which is exempted from the surcharge were to be £5,000 a year, a very large slice. Then the Government would be subject to immense pressure from their supporters, who would say, "If you have exempted £5,000 of investment income from the surcharge, what is the point of having a surcharge at all? Surely you should abolish the surcharge altogether because that would Le the logical thing to do. Maintaining the surcharge creates all kinds of anomalies.' That would be their line of argument.
But if the first slice were a small one and if the Government were able to demonstrate that the reason they had adopted it was simply that there were administrative difficulties in collecting the surcharge from the recipients of small unearned incomes, that would be a different matter. The argument that might come from the benches opposite would then be very much less formidable. That is all I am trying to establish. It makes a fundamental difference how large the first slice is to be.
The second reason why we put down the Amendments is that we wish to retain what we see as the advantages of the new system while eliminating what we regard as the disadvantages. We accept that the new system has advantages. We accept that the unification of income tax and surtax will enable a smoother progression. That is a point of view which my hon. Friend the Member for Heywood and Royton has pressed

for many years. We also accept that the abolition of the present cumbersome system by which a standard rate is combined with earned income relief will eliminate some of the misunderstandings which at present cause many people to believe that they pay a higher rate of tax than they are paying in fact. These are undoubtedly advantages.
Most of my hon. Friends would probably say that the advantages are not quite as earth-shattering as some Ministers appear to believe, and we are rather sceptical as to whether they will, by themselves, generate the extra dynamism and initiative which some of the more naive supporters of the Conservative Party appear to believe. Nevertheless, we accept that they are advantages and we want to retain them.
From our point of view, however, it is a major disadvantage that the Government apparently intend to erode the distinction between earned and investment income, which has been one of the cornerstones of our taxation system since 1907.
If the Amendments were accepted, the existing discrimination in favour of earned income would be retained. The rate for unearned income would be 38·75 per cent. so that the differential in favour of earned income would remain as great as it is at present. Secondly, it would mean that the withholding tax on dividends would be at a rate of 38·75 per cent. instead of at 30 per cent., as is foreshadowed in the Bill. Thirdly, one of the Amendments would mean that at the bottom end of the income tax scale one would pay 20 per cent. instead of 30 per cent. We believe that this would make the taxation system more progressive and would reduce the disincentive effects at that end of the scale, which are at least as serious as the disincentive which is sometime alleged to exist at the higher end of the scale.
I should like to comment briefly on these three points. The Committee stage debates revealed what is, in any case, well known: that we on this side of the House believe as a matter of principle that income from work ought to be treated more favourably than income from property. However, I do not intend to go into the somewhat theological arguments for and against that proposition which detained us in Committee because it


would be profitless to rehearse them yet again. Both sides of the House know where they stand on that point.
The second reason why we believe that discrimination in favour of earned income should be retained is that it is clear that property incomes go preponderantly to the wealthy. If the first slice of investment income which is to be exempted from the surcharge is a large one—from what Government spokesmen have said, we have every reason to fear that it will be large—the taxation system will become even less progressive than it is, inequality in our society will be increased and social divisions will be magnified.
The only hard, tangible argument which the Government have advanced for eroding the distinction between earned and investment income is that to do so will encourage savings. It is, in any case, a dubious proposition that blanket encouragement to savings should be given through the taxation system. The Royal Commission on the Taxation of Profits and Income looked at this matter in the 1950s. In its final report in 1955 it said at paragraph 76:
There is only one thing that remains to be said with regard to personal savings. If life assurance relief and the relief for national insurance contributions are retained, and if superannuation relief is developed to what we regard as its logical conclusion, we think that the tax system will be making as much concession to savings as it is reasonable or proper that it should. However desirable for economic reasons the encouragement of personal saving, measures adopted for its encouragement should lie outside the sphere of the income tax system, to the general equitable principles of which differentiation measured by saving is not, as we have said, either easily or closely related.
In our view, that argument is as forcible as it was when the Royal Commission put it forward. In any case, it is not clear that increasing the rate of return on savings, which is the object of this change, will necessarily increase the level of savings. There is no exact correlation between the rate of return on savings and the level of savings. People save for all sorts of different reasons. One cannot say that, because the rate of return is increased, the level of savings will necessarily rise. Moreover, from the point of view of economic management, what counts is not simply the level of individual savings but the extent to which the community as a whole forgoes consumption in favour of investment. It is only

worth while to stimulate savings by means of tax concessions if savings increase by at least as much as the tax yield is reduced. There is no evidence that this will happen as a result of the change which the Government are proposing in this Clause.
It may be that as a result of exempting the first slice of investment income from the surcharge, savings will go up by a certain amount. But the Government have given no proof that the extent to which savings will go up will be as much as or greater than the extent to which the revenue will go down and, if the loss of revenue is greater than the increase in savings, from a demand management point of view we gain nothing.
I want now to say a word or two about the point concerning the withholding tax, to which I referred earlier. The effect of the Bill as it stands is that the withholding tax on dividends will go down from the present standard rate to the proposed basic rate of 30 per cent. That means that the recipient of dividend income will be in a significantly better position than he is at present from the point of view of the cash that he holds in his hand. It seems to us quite unjustifiable that the change should be made in this way. There will be a significant loss to the Revenue and a gain to the taxpayer in terms of view of cash flow for which there is no conceivable justification.
There is also a narrower point in this connection which was raised in Committee and which the Financial Secretary was good enough to say that he would look at again. I should like to ask the Chief Secretary what the result has been of his hon. Friend's researches. The point concerned accumulation trusts. In Committee on 14th June, the Financial Secretary said:
To the extent to which—I think I must limit it to this—the reduction is from the standard rate of 37½ per cent. to a new basic rate of 30 per cent., this gives benefits to accumulation trusts which may not subsequently be recouped when money is then paid out by the trustees, and I certainly will look at that…. Without in any way minimising the administrative difficulties, I will look at this point again to see whether there is some possible loss of revenue of a size which would make it appropriate for us to legislate to cover the case."—[OFFICIAL REPORT, Standing Committee H, 14th June, 1971; c. 522–3.]


I should be grateful if the Chief Secretary would tell us what the result of that second look has been.
Finally, we propose to lower the starting rate of personal taxation from 30 per cent. to 20 per cent. I do not think that there can be any doubt that the disincentive effect of the very large jump which the present system involves is considerable. The point at which many taxpayers begin to pay tax happens, for other reasons, to coincide—or almost coincide—in many cases with loss of benefits of one kind or another. It is now well established that the net result is that in some cases the marginal rate-of-tax-cum-loss-of-benefit experienced by people who are starting to pay tax can be very much higher than it is for the highest surtax payer. In our view and in the view of many authorities much more expert than I am, this has a disincentive effect. Indeed, we all know from the experience of talking to our constituents that it is at this point that the shoe pinches hardest in our system. We believe, therefore, that there is a powerful case on economic grounds for having a starting rate of 20 per cent. instead of 30 per cent.
It would also help make the taxation system more progressive than it is at present. The change would not be inconsistent with the new system that the Government propose. Largely for procedural reasons in terms of tabling an Amendment, we have proposed a basic rate of 20 per cent. One could still have 30 per cent. as the basic rate, but with a lower rate of 20 per cent. for those starting to pay tax in a certain band of income. We think that this is a constructive proposal, and we hope that the Government will consider it favourably.
I suspect that even the force and power of my arguments may be insufficient to persuade the Chief Secretary to change his mind about the need to retain the present differentiation between earned and unearned income. I hope, however, that he will be a little more generous with information and more forthcoming on the point about the starting rate than Ministers have been hitherto.

5.45 p.m.

Mr. Gower: The hon. Member for Ashfield (Mr. Marquand) suggests lower-

ing the rate from 30 per cent. to 20 per cent. I do not know whether the hon. Gentleman has made any estimate in gross figures of the consequences of that change.

Mr. Marquand: I am sorry. Perhaps I should have detailed that point at greater length. Our Amendment is misleading to this extent. We have said that the basic rate should be 20 per cent. which rather implies that the vast majority of taxpayers should pay income tax at 20 per cent. instead of at 30 per cent. That is not our intention. Our intention is that taxpayers entering the tax net should pay at the rate of 20 per cent. instead of 30 per cent. and, therefore, that the rate should be lower for a narrow band at the beginning.

Mr. Gower: That may be the case, but that is not what the Amendment says. The hon. Gentleman has moved an Amendment to do one thing and, in his speech, has described something completely different.

Mr. Barnett: No.

Mr. Gower: The hon. Gentleman—

Mr. Barnett: Where does it say that the 30 per cent. rate covers a particular band—and, if so, what width?

Mr. Gower: I am saying that the hon. Member for Ashfield did not give any indication of the consequences of reducing the rate from 30 to 20 per cent.
The hon. Gentleman devoted the greater part of his speech to the encouragement of savings. However, he underestimates the size of the task of increasing the number of those who save regularly. That is a very difficult job in the inflationary society in which we have lived for some years. What is more, the hon. Gentleman underestimates the degree to which saving is desirable. Clearly, it is very desirable that we should increase significantly the number of those who are disposed to save. It is not an easy job. My right hon. Friend the Chief Secretary spent a great deal of time before becoming a Minister thinking about one or two aspects of the problem. During the term of office of right hon. and hon. Gentlemen opposite, the hon. Member for Ashfield will have learned how difficult it was for the previous Administration to persuade the


people to increase the contribution made by savings on a national scale.
The hon. Gentleman went so far as to suggest that there may be little or no relationship between the rewards of savings and the amounts of saving. I hope that I do not do him an injustice. He seemed to imply that he could find no relationship between the two. I should think that there is ample evidence that this is not so. Indeed, the whole story of building society rates is based on their experience that, unless they keep their rates to their investors at certain levels, they lose to alternative forms or saving offered by other agencies. It is a constant battle for the building societies to sustain a satisfactory level of income unless they adjust their rates to attract the saver.
Despite the moderation with which the hon. Member for Ashfield has worded his proposal, I think that he is underestimating both the need for saving and the size of the task which confronts successive Governments of both parties if we are to succeed in future in encouraging a more formidable contribution from savers and significantly enlarging the numbers of those who save.
It is for that reason that I welcome the design of this valuable change which is likely in the years ahead to help to achieve an object which is close to the hearts of many hon. Members on both sides of the House. The obvious advantage of this basic rate is that it will be less likely to create in the minds of a large number of people the apprehension that they are paying an excessive amount of tax. This is extremely valuable. The hon. Gentleman referred to people being discouraged from extra effort at work by this feeling. We have often met constituents who have said that they have been dissuaded from extra efforts—through overtime and other forms of work—by this feeling. I believe that this change will go a long way to lessen that danger. It is in that spirit that I certainly welcome the change.

Mr. Heffer: I should like to make a few comments on the points made by the hon. Member for Barry (Mr. Gower).
First, the hon. Gentleman's point about savings had very little validity. The suggestion is that, as a result of reducing

the level from 38·6 per cent. to 30 per cent. for unearned income, those who receive this extra relief will use it for additional saving. There is no guarantee that this will happen. There is no guarantee that this money will be ploughed back into further investment. No one knows precisely what will happen.
Concerning general savings, the hon. Gentleman overlooked the interesting fact that the savings of the masses are increasing. The reason is that people are living in a period of fear about the future more than they have felt since the end of the Second World War. That is the basic reason for working class people being more careful and keeping a little money aside. They fear unemployment and the future with this Government. This is a paradoxical situation. One would imagine that in this period of inflation there would be less saving; but there is more saving because of the situation into which we are being led by the Government.
We ought to look closely at the Government's proposals The idea that those receiving unearned income should have the same taxation as those with earned income is a philosophy which we ought not to accept. It is totally alien to the ideas of taxation which we have had for a very long time. It means that those with better positions in society, those who can afford to invest, particularly those with large sums of money, will be receiving a greater benefit than those who do not have large sums of money to invest. That is the philosophy of right hon. and hon. Gentlemen opposite. It is perfectly understandable. This is what it is all about. I must say that they help their friends; they do look after them. I regret that sometimes we did not look after our friends quite as well as they look after theirs.

Mr. Marquand: We have more friends.

Mr. Heffer: We certainly have. That is all the more reason that we should look after more of them.
I understand that the drop will be to 30 per cent. or thereabouts and that there will be an investment surcharge. We have no idea what the investment surcharge will be. We do not know when it will begin. I think that the Chief


Secretary has a lot to explain this afternoon. He must give us a clear understanding of precisely what is in the Government's mind and what they are playing at in this regard.
Lastly, we are in a difficult situation because we do not know exactly what we are discussing. It is almost like putting one's hand into a mystery bag and not knowing what will come out. It is like many other things which the Government do. There is a great deal of mystery surrounding all kinds of things. We heard a bit of a mysterious story this afternoon about who said what and who did not in another matter. The Chief Secretary must explain this mystery to us.
I say without fear of contradiction that if the British people fully understood what was involved and just how much the Government are helping their friends at the expense of the ordinary taxpayer they would certainly build up the Labour majority in Macclesfield a lot higher than it will be at the next by-election.

6.0 p.m.

Mr. Maurice Macmillan: In moving this group of Amendments the hon. Member for Ashfield (Mr. Marquand) said that there were two purposes to them. One was to get the Government to be forthcoming—a plea which has just been echoed by the hon. Member for Liverpool, Walton (Mr. Heffer)—and the other was to do what he referred to as retaining the advantages and eliminating the disadvantages of this group of Clauses. I noticed that he did not specify his bottom slice of income which would attract 20 per cent.
The hon. Gentleman said that we had been cagey about these Clauses. His argument boiled down to the fact that he was concerned about the size of the slice of income. He admitted that it was not reasonable to expect my right hon. Friend to specify in advance the rates or the level of taxation, but he wanted to know the approximate size of the slice.
The hon. Gentleman referred also to the possibility of specifying the basic rate for earned income as 30 per cent., and asked what was the difference between this and other rates. The difference is that the basic rate, as the Chancellor made clear, is the present standard rate

less earned income allowance and, therefore, is the basic rate for earned income. It is an expression of fact which exists, whereas the surcharge cannot be related to any existing rate of taxation, nor can the size of the slice of income.

Mr. Marquand: I know that the Chancellor said that. I heard him say that during the debate, and I re-read it when preparing for this debate. But what we cannot see is why the hon. Gentleman cannot say what the difference between the investment income rate and that basic rate is going to be. The basic rate may not be 30 per cent. at the end of the day. It may have to be varied, because circumstances change. I do not see why that makes it impossible for the Government to level the extent of the gap between the earned income rate and the investment surcharge rate.

Mr. Macmillan: It is because the surcharge is a new concept, and, as my right hon. Friend has made clear, he will decide its level in the context of the situation next year. The basic rate is not a new concept. It is simply a translation of the existing standard rate, less earned income allowance, into a straight percentage figure rounded off.
We cannot go any further than we have gone in these debates, which I know will not satisfy the hon. Gentleman, which is to say that the Chancellor will decide on the rate of the surcharge and will, when this Measure becomes law, settle the size of the slice of investment income which is taxed at the basic rate. Various reasons have been given—the administrative one, the need to keep flexibility for demand management, and so on. My right hon. Friend, and I agree with him, regards this as a necessary freedom of action which he must retain.
The Amendments taken together set out the skeleton of an alternative system of unification. Instead of the system that we have, which is constructed in terms of a basic tax, with an investment surcharge, the hon. Gentleman is putting it the other way round. He has a dual system, with separate rates of tax for earned and investment incomes. The "basic investment rate" would be the withholding rate—that is Amendment No. 37–and for 1973–74 would be fixed provisionally at 38·75 per cent., equal to the present standard rate, that is Amendment


No. 39. The tax on earned income would start at 20 per cent.—that is Amendment No. 38–though the hon. Gentleman made certain qualifications to that, and I shall deal with those in a few moments. One consequence of the Opposition's scheme would be that there would be no slice of income charged at the lower rate. As the hon. Gentleman said, a scheme of that kind is contrary to the Chancellor's purpose, and the purpose of this side of the House, of reducing the differentiation between earned and investment incomes.
I could not help noticing that the hon. Gentleman used the word "erode", as though there were something time-hallowed and sacrosanct in the level of this distinction which has been a principle since 1907. I should not necessarily regard its age as being a guarantee of its relevance to any political objective of either side of the House.
I should like to say a few words about the cost, although I do not want to refine on this because the hon. Gentleman made it clear that he was not being specific about the level at which the 20 per cent. should apply. The extra yield, taking 1971–72 levels of income, which would come from charging investment income at 38·75 per cent. would probably be about £200 million. The cost of reducing the basic rate of tax on earned income from 30 per cent. to 20 per cent., at 1971–72 levels, would amount to about £1,800 million, but the hon. Gentleman said that it was proposed to do this only for an initial slice of income.

Mr. Marquand: I may have misheard the hon. Gentleman, but he seemed to say that he had made a judgment about the size of the slice, otherwise how can he tell what the increase in revenue would be from charging below the slice?

Mr. Macmillan: I made it clear that I was talking about the hon. Gentleman's proposal and comparing it with 1971–72 levels of income. What I was saying was that if there were no slice and the tax on earned income were reduced from 30 per cent. to 20 per cent., there would be a loss of revenue of £1,800 million.

Mr. Marquand: I should be the first to apologise if I have misunderstood the hon. Gentleman, but I thought he said that there would be a gain of revenue of a certain amount by charging all invest-

ment income at the 38·75 per cent. rate, and he then said that there would be a loss through charging earned income at a lower rate. If the hon. Gentleman is in a position to say that there would be a gain of such-and-such an amount because of charging all investment income at 38·75 per cent., instead of charging only some investment income at that rate, he must have made some judgment about the size of the slice. If he has not done so, how can he make the calculation?

Mr. Macmillan: I am making no judgment about the size of the slice. I am saying what would happen if it were applied to the current situation before the proposals in the Bill were brought into action.
To take the size of the hon. Gentleman's slice at the bottom end of the band, a reduced rate of £260, charged at 20 per cent., carved out of the basic rate band, would cost the Exchequer about £500 million. I find this plea from hon. Gentlemen opposite that we should go back to a reduced rate band at the bottom end of the tax scale a little strange because, after all, it was their Government who, some time ago, eliminated the marginal rate of tax at the bottom end of the scale.

Mr. Barnett: Is it not intended, under the Government's proposals, that there should be a rate band all the way up the scale from 20 per cent. at different levels?

Mr. Macmillan: I was merely saying that I thought it odd that in Opposition—

Mr. Barnett: Answer the question.

Mr. Macmillan: —hon. Gentlemen opposite were proposing a course of action which they were hasty to reverse when they were the Government.

Mr. Barnett: Now answer the question.

Mr. Macmillan: In the course of these Finance Bill debates the Opposition have criticised our methods of unifying the tax structure, while welcoming unified taxation in principle. They have asked a number of questions, most of which we have not been able to answer, such as the question of the structure and the level of the slice of income to be taxed at the basic rate, and the investment income surcharge.
The hon. Member asked one specific question about an undertaking which my hon. Friend the Financial Secretary gave him in Committee. That concerns the effect of the withholding tax level on accumulation trusts. My right hon. Friend gave an undertaking that this would be looked at. I am sorry to say that I cannot tell him any more except that we are looking at it. It has proved a matter of some considerable complexity. It is just not possible to say anything more at this stage except that, if necessary, the Chancellor will bring forward proposals in due course. I am sure that the hon. Gentleman will accept that this is not an easy matter to dispose of.
The real point of dispute in this debate, as in previous debates, has been the propriety or otherwise of having a tax system unified at a basic rate with an investment income surcharge. The difficulty faced by hon. Members opposite is tailoring their remarks without knowing precisely what the surcharge will be. The implication in their speeches is that unless it is such as to represent a savage extra tax on unearned income, as they call it—investment income—they will be dissatisfied.
They have shown that they expect and hope that the first slice of investment income tax at the basic rate will be very narrow indeed, confined virtually to that chosen for administrative reasons. It is true that this shows a different approach to the need for saving, to the desirability of encouraging investment and allowing those who save and invest, up to a level which the Chancellor will in due course decide, to receive the benefits of the lower rate of tax.
This is not contrary to the Royal Commission's criticism of using the fiscal structure for encouragement of savings, although I admit that, from my previous activities in the Wider Share Ownership Council, I have never accepted the validity of that criticism anyway. But this shows a very different approach by right hon. and hon. Members opposite, which was made clear to us not least by the attitude of the hon. Member for Ashfield to savings, when his entire description of the effect of his Amendments on savings was couched in terms of demand management. He made it clear that to him it did not

matter whether the money was withheld from someone and invested by taxation or by savings. It is because we are in fundamental disagreement with this point that I would urge the House to reject these Amendments.

Mr. Robert Sheldon: The Chief Secretary said that the Chancellor would be bringing forward his proposals in due course. What we have particularly at heart is that we are asked to pass legislation without knowing the shape of that legislation, just because the shape of that legislation and the levels of taxation are so inherently bound up together.
Of course, many of my hon. Friends have viewed some of the advantages of the single rate structure with considerable pleasure. This is something which we have been advocating for years. What we do not wish to see, and what we are apprehensive about, is that, under the cloak of an attempt to produce a very useful reform of a single rate, an effort is being made to provide certain benefits for those people who, under this Budget and the various measures instituted by the Government, have already benefited considerably.
6.15 p.m.
The advantage of the single rate structure is obvious. In taxation, as in every aspect of life, it is foolish to let the person who is paying assume that he is paying more than he is in fact paying. It is foolish to let him assume that the standard rate is 8s. 3d. or, now 7s. 9d.—38¾ per cent.—when the true rate is much lower. That nonsense had to be ended. People had this wrong and thought that they were paying more tax than they were. Although the common commercial practice would be to get those who are paying to assume that they are paying rather less than they are, in fact they thought that they were paying more. This was a useful, though not shattering, reform, and I welcomed it in that light.
But I do not wish to see it being used to change fundamentally the balance between those people who work for their living and those who draw large levels of investment income. What we have seen today is a continuation of so many of our previous debates, when we are not even given to understand the choice that the change involves. This is what causes so much disquiet.
The Chief Secretary said today, as on previous occasions, that these are matters for which we have to wait. But I cannot help recalling that, on a previous occasion when a fundamental change in taxation was made—I am thinking of 1964, when the corporation tax was introduced—there was an undertaking by the Government of what that rate should be, so that the companies concerned should be able to make their calculations on the basis of the projected rate of corporation tax. No commitment was given as to the level of that tax, but it was said that, if the situation as it was at that time applied in future, the level of the tax would be so much. Despite all the explanations which the Government have offered, despite the explanation given by the Chief Secretary today, I have failed to understand why that same kind of undertaking could not be given now.
The Government know how much they intend to raise by income tax. They have a system in their mind. I fail to see why they should not say, on existing assumptions, that the level will be so much, the amount of the slice so much and the amount of the investment so much. On the basis that they are trying to get, out of the whole system of income tax and surtax, the same amount of money, broadly, as they are getting today, I cannot understand why they do not follow that useful precedent of 1964 to enable people who have to understand these matters to have the advantages of knowing the facts.
What caused me considerable anxiety was the statement by the Chief Secretary just now, when he described what he thought were the views of hon. Members on this side, that we wanted to increase savagely the extra tax on unearned income. I do not know what he means by this. The system of taxation which we left, roughly speaking the system which remains after the introduction of this Budget, was the one with which we thought we were not totally dissatisfied, although there would be changes all the time. But it is the Government who are introducing these changes.
What does the Chief Secretary mean when he says that the system is too savage? Is there to be a massive change in the system of payment, away from those who cannot avoid paying because their income is earned to those with

unearned income? Is the hon. Gentleman aware that he is not attacking any new proposals from us because we are not making any? He is attacking the existing system, and it is that which the Government intend to change. In view of the fierce language he used to attack the present system, he is in duty bound to indicate the changes the Government will be proposing.
The Chief Secretary spoke of the need for flexibility in relation to demand management and the necessity for freedom of action which the Chancellor is maintaining. This is all accepted and obvious. If we take the need for demand management to be the same as it is now and couple with it the Budget judgment, which we know to be erroneous, we are entitled to ask how much tax the Chancellor will need to raise.
What will be the level of the investment income surcharge and what are the other relevant details? I would be astonished to learn that the Chief Secretary did not have a close idea of these figures. A new tax system having been framed, he must have some idea of the figures, especially as he has denounced the existing system as a savage imposition. As on so many occasions when debating this Finance Bill, we are in need of more information.
A new system calculated on the basis of comparability must be capable of being justified intellectually, and in this instance it cannot be done by the Minister referring to X, Y and Z. We want some figures put into the equation because only by that means can the system be made to come alive.
We keep returning to this subject because of the fear that has been engendered by the sort of statements the Chief Secretary and his colleagues have been making. In view of the fundamental change that is likely to occur in relation to investment income, we fear that the earner of income will be placed in a declining position.
In his speech of 12th January the Chancellor of the Exchequer said in a message that obviously had deep implications for his period in office that steep personal taxation was, in his view, a major factor in the poor economic growth of the nation. Every Chancellor since the war has made an effort to discover


the reasons for our poor performance in economic growth terms, but this Chancellor gave a commitment in terms that has not been given previously.
The level of surtax, which has been drastically reduced, the advantage given to those with large incomes, the advantage, still undisclosed, that will result from the change from the old system of unearned to earned income, along with the investment surcharge, is bound to put the earner of income in a declining and worsening position.
Let us be clear that the present view of the Government was not always the attitude of the Conservative Party. Conservatives brought about some of the biggest tax differences between earned and unearned income. For example, in 1952 they raised the tax distinction between earned and unearned income to the highest level it had ever been. They did so rightly, because there should be a great distinction between those who work for their living and those who enjoy inherited wealth. It is hard enough nowadays for ordinary men and women to earn a decent living, and they should be accorded the advantage of differential rates of taxation for their efforts.
When, in 1938, taxation went up to 9s. 6d. in the £ under the Tories, this distinction between unearned and earned income was enhanced. That was done by the Tories and I give them credit for doing it. Today we are witnessing the first fundamental change since long before the war in that system, to the detriment of the ordinary citizen. As a result, those who have will receive very much more than those who earn. This has been the message of this Budget, a message which is exemplified by this Clause.
The other advantages which the Government are giving to those with large and unearned incomes we can calculate. The one with which we are now concerned, however, we cannot calculate, and the Government stand condemned for their failure to provide us with adequate information on this issue.

Mr. Denzil Davies: The real point of seeking to have a higher basic rate for investment than for earned income is to restore some equity and sense

of justice into a Finance Bill that is extremely favourable to supporters of the Conservative Party.
By establishing in Clause 29 a basic rate of withholding tax which is based on the present standard rate, less earned income relief, and by then applying that rate to all kinds of income, earned or investment, the Government are conferring a major and substantial benefit on those who receive investment income. In terms of our present legislation, the effect of this will be for investment income to get the benefit of earned income relief.
Hon. Gentlemen opposite have been clear about the reason why they are taking this step. It is because they believe that investment income should not be taxed at a higher rate than earned income. We disagree with them philosophically, but like my hon. Friends, I will not argue about this theologically or philosophically because ultimately it is a question of priorities.
We must decide how much we want to allocate to public expenditure. Having taken that decision, we must decide from whom we will obtain the bulk of the money. We believe that it is more just and fair that those with the greatest wealth should make the greatest contribution to the national good, while people on lower incomes should pay less. Hon. Gentlemen opposite believe differently. They reduce tax on investment income and increase all sorts of charges and remove free school milk. They increase the means test on people who are less able to look after themselves. This clash of philosophy and priority will not go unnoticed in the country. My hon. Friend said that there was a bag here with something mysterious in it, but I beg to differ from him. There is nothing mysterious inside. The bag is full of goodies which will be distributed to the wealthy supporters of the party opposite.
6.30 p.m.
We have been told that one of the reasons for Clause 29 is the need for simplification, and no doubt we will be told this again before the debate is over. There may be some small simplification as a result of the establishment of one basic rate, but before we can decide whether that simplification is beneficial we should be told what it will cost the Treasury. Whatever else Clause 29 may do, it will


cause a loss of revenue. In most cases, when Clauses involve a loss of revenue that loss is listed in the red book. In this case the cost is about £110 million in favour of the better off in our society.

Mr. John Nott: What the hon. Member means by "loss of revenue" is that the Government are reducing taxes. I suppose that he is against that?

Mr. Davies: No, I mean precisely that the Government are reducing taxes by £110 million in favour of those, basically, who earn £5,000 or more, and who live on capital or on inherited wealth. I do not shrink from that at all. That is what the Government are doing. At the same time they are increasing taxes on the less well-off.

Mr. Nott: The Government have not increased taxes on those less well-off. They have substantially reduced them in the Budget. Because someone has investment income it does not mean that he has inherited wealth. He may have worked hard all his life and saved his money.

Mr. Davies: If the hon. Gentleman were to ask those at the lower end of the scale whether the Government have increased their taxes or not, I have no doubt what their answer would be.
The Clause benefits a number of groups of persons, and we should be told the cost to the Exchequer of that benefit. First of all, there are the individuals who will not be subject to investment surcharge. They will get earned income relief on their investment income, and because there is a reduction of £8 or more for every £100 of gross income the Government should tell us how much the loss of revenue will be.
Next we come to companies. A number of hon. Members opposite were rather perplexed about this in Committee, but the fact is that by reducing the basic withholding tax rate on all dividends and other investment income the Government are giving a reduction, again, of just over £8 for every £100 of investment income which a body corporate receives. Some of the resulting loss of revenue may be recouped if the company passes on the benefit by means of another dividend to shareholders, but no doubt many companies will not do so. Again, therefore,

we should be told how much loss of revenue the Government envisage.
We also raised in Committee the subject of payments to overseas residents. A few countries do not have double taxation agreements with us. The result will be that all dividends that leave these shores and go to residents in those countries—companies or trustees—will now have a reduction of tax of £8 out of every £100. The Financial Secretary accepted that fact in Committee and said that there would be some loss of revenue but, again, we have not been told what the extent of the loss of revenue will be. It amazes me that the Government should frame a major Clause which is at the base of reforms and changes and yet have no idea, or will not tell us, what its cost will be.
We also raised in Committee the question of trustees, and the Financial Secretary undertook to look at it, although I detected a certain feeling on his part that this was not a very major problem. But we are not talking about accumulation trusts in the narrow sense. Every trust where there is power to accumulate income—and that power can be extended for 20 years, and in certain circumstances for 80 years—and which does accumulate income will, again, benefit by £8 in every £100 of gross income. In addition, it will not pay any of the excess rates or the investment surcharge, but since we are concerned here with a withholding tax I will not go into that aspect.
The Treasury Ministers should look at this, as it is a major problem. I suggest that at the end of the day they will only have been able to find some settlements and trusts, because in many cases they do not know whether or not they exist, since there is no registration of settlements and trusts.

Mr. Peter Rees: The Amendment would benefit such accumulated settlements, as it seeks to reduce the basic rate of investment income, which means that less will be deducted and accumulation settlements will therefore benefit.

Mr. Davies: I was not suggesting that they would not benefit. I am complaining that they will benefit. They will pay less tax, because the income they receive is never distributed, which means that it


never goes into the hands of the individual and thereby gets taxed at excess rates and attracts the investment surcharge. It is turned immediately into capital and it will benefit by the reduction.

Mr. Peter Rees: An Amendment in the name of the hon. Member for Ashfield (Mr. Marquand) seeks to reduce the basic rate from 30 per cent. to 20 per cent. That must benefit accumulated settlements, and I am delighted to hear that hon. Members opposite are converted to that thought.

Mr. Barnett: The hon. Member for Dover (Mr. Peter Rees) has obviously not understood the Amendment, since it is also proposed that the basic investment rate should be 38·75 per cent. That would mean that there would not be a reduction.

Mr. Davies: I was concerned, because the legislation proposes one basic rate. We propose two basic rates, one to apply to earned income and one to apply to investment income. We seek to maintain the differential between earned and investment income. If Clause 29 is enacted these accumulation settlements and trusts will benefit to the extent I have described. In addition they will benefit because they will not pay any of the excess rates or the investment surcharge.
I therefore urge the Chief Secretary and the Government to look at the whole matter, because they may find a considerable loss of revenue resulting from their proposals. But they should not be doing this now: they should have done this before introducing the Clause. They should have worked out their sums before asking us to vote on the Finance Bill.
The cost of the Clause is completely vague—we do not know what it will be—and the Amendment seeks to restore some equity in this respect. The Amendment will no doubt be voted down by hon. Members opposite who, in doing so, will again demonstrate where their sense of priorities lies.

Mr. Loughlin: As I understood him, the hon. Member for St. Ives (Mr. Nott) claimed that the Government have been very generous towards the generality of taxpayers—the earned income tax payers, the lads who work in the factories

—and have reduced their tax commitments. Nothing of the sort. I cannot understand how he arrives at that conclusion. What the Government set out to do and have successfully done is to introduce a change in the system of taxation from direct to indirect taxation. If we are considering the benefits to be derived by the generality of taxpayers, we must not only look at the increase in the child allowance or the 6d. reduction in income tax, because that reduction does not affect the vast majority of industrial workers. We must look at the total amount being paid in tax by the average person.
One must bear in mind the various kinds of charges which have been imposed upon every household—for example, the amount allocated in the last agricultural Price Review to increased housewives' costs; the extra amount which housewives are going to have to pay through the ten levy Orders, and other measures. On that basis, one can see the fatuous nature of the hon. Gentleman's claim.
I do not mean this in a nasty sense, but I felt that my hon. Friend the Member for Ashfield (Mr. Marquand) was being a bit naive when he said that the Government were in danger of being driven by their back benchers into eroding the differential between earned and unearned income, so that eventually it will cease to exist. I do not know why he imagines that there is a difference of opinion on this matter between the Government and their supporters. I believe that there is absolute unity among them on that issue, the unity of the Gadarene swine—I do not mean that in a nasty sense either. I believe that this is part and parcel of the Conservative Party's overall taxation strategy.
Whenever there is the slightest criticism of dividends, the Tory Party claims that dividends are the barometer by which we measure people's success. If business is making higher profits, that is success. I do not mind that attitude but the trouble is that when industrial workers want to improve their own incomes and ask for wage increases, we are told that this is highly immoral. Apparently, it is the height of morality for dividends to increase but the height of immorality for earned incomes to increase. That is the Conservative Party's approach.
I am under no illusions about Clause 29. There have been arguments about the non-disclosure of the estimated slice of the cake that will be given in consequence of the Clause. The Chief Secretary got himself entangled because, while he was able to give us a number of estimates, he could not give us the most important one. The Clause is drawn as it is precisely because it will give the Government the opportunity in 1973–74 to decrease the differential between earned and unearned income. That is the intention. They do not seek to deny it. They genuinely believe that unearned income should be given a more favourable status than earned income. I challenge the Financial Secretary to deny it. There is no need for us to be as naïve as my hon. Friend. He is only naïve because he is such a nice fellow. He still thinks that hon. Members opposite have the qualities of the angels they pose as. But I do not criticise him for being naïve.
6.45 p.m.
We have had references to savings. Perhaps the House can help me on this. I am always at a loss to understand what inducement one can make to get people to save. I have always maintained that people only have a given measure of disposable income after they have catered for their known requirements. Most of us live to a given standard. We cater for that standard and beyond it there is a part of our income that we can dispose of in the form of savings, be it 6d. or £6. It seems to me that there is no genuine reason why we should induce people to save. They will save only that which is surplus to their known requirements. There may be a margin in which they can cut down on their requirements in order to increase their savings, but it is a very small margin. I do not see how we can induce people to save more than it is possible for them to save.
The other factor is the reason for which people save. It has been argued that the more we can get people to save, the less taxation we have to impose. One of the criticisms of the last Government was that people were not saving, that they were spending. It is now being recognised by a majority of economists that savings have gone up, particularly in the last six months, because people are beginning to fear the future. They are

beginning to fear unemployment. They are beginning to fear runaway inflation. It can be argued that it is better to buy goods than to put money in the bank, but people do not act wholly rationally in circumstances of this kind. The reason why savings are going up is that people are afraid of what will happen on the morrow.
I have listened throughout the debate and I am under no illusions. I do not think that the Chief Secretary, even if he seeks leave to reply again, will give us any more information, since the refusal to give information is based clearly on the desire to keep that information to himself, because at this stage he does not want to disclose that the next phase in the redistribution of income will be a further concession to those who live on unearned income.

Mr. Cronin: I would like to preface my remarks, for a change, by saying something complimentary to the Government.

Mr. Barnett: Hear, hear.

Mr. Cronin: I must be fair, but it will be brief.
I think that we all welcome this unified tax system. Certainly, it would work much more satisfactorily if applied by a Government composed of individuals from this side of the House. I do not know that we can trust right hon. and hon. Members opposite to work it.
In principle, the whole idea of a unified tax is a considerable improvement and some of us on this side—and, possibly, some hon. Members opposite also—have pressed for it for many years. Even during the time of the last Conservative Government, we applied pressure for these changes, and I am glad to see that, at last, the party opposite have found a way of doing it.
In dealing with this group of Clauses concerning income tax to be charged for 1973–74, I cannot understand why the Chief Secretary has been so lacking in frankness with us and so unforthcoming as regards proposals for taxing investment income. The Government have been quite straightforward in Clause 36. They have said that
The basic rate for the year 1973–74 shall be 30 per cent., unless Parliament otherwise determines.


I cannot understand why the Chief Secretary could not today give us an indication of what the surcharge on investment income will be. He said that the investment surcharge would be decided later. At the same time, he said that the basic rate of 30 per cent. was purely notional and that it could easily be changed as the Chancellor of the day thought fit. I cannot understand why there cannot be inserted in the Bill an indication of the Government's ideas about the surcharge on investment income in the proposed unified tax.
Naturally, we on this side must regard this with suspicion. I rather feel that we are being asked as a House of Commons to buy a pig in a poke. We are being asked to approve the scheme of unified taxation without having any idea of the Government's thinking on the important question of taxation of investment income.
Colour must be lent to our suspicions by what the Government are doing in the Bill. We know, for instance, that businesses and corporations are being saved £105 million a year. So we know that big business is being looked after. We know that surtax payers will benefit to the extent of £38 million a year. Capital gains taxpayers will benefit to the extent of £15 million a year. There will be reductions in estate duty to the tune of £20 million a year. These and several other concessions of the same nature total about £200 million a year.
That large sum is being handed back to the wealthier part of the nation, admittedly to the part of the nation which has given backing of a substantial financial nature to the Conservative Party. Presumably, this is the Government's way of showing their gratitude. This is a particularly unfortunate time to show gratitude, however, when it involves handing out about £200 million a year to the wealthiest members of the community and, at the same time, asking the lower-paid members of the community—the trade unionists—to moderate their wage claims. I cannot imagine a more unsuitable time to do this.
The important thing, however, is the Government's extreme generosity to the wealthier sections of the community. It makes us wonder what will happen when, in due course, a Finance Bill is intro-

duced to implement the changes envisaged in this group of Clauses for the unified tax of the future. That is what worries us.
The Chief Secretary certainly added fuel to the flames of our suspicion, because he said that he would not regard as sacrosanct the differential treatment between earned income and investment income which has existed since 1907. Thus, we have the Chief Secretary saying, in words almost as plain as any Chief Secretary could say it, that when a Finance Bill is introduced to implement these changes in taxation, there will be preferential treatment for people who receive income from investments.

Mr. Maurice Macmillan: If I recall correctly, I did not say that we regard it as sacrosanct. I said that we did not consider it sacrosanct because it had existed since 1907.

Mr. Nott: I do not know why the hon. Member for Loughborough (Mr. Cronin) is going on about preferential treatment. Up to now, there has been discrimination against savings income. There is a possibility that, belatedly, a Government will remove it. That is what we are talking about. We are not talking about preferential treatment for investment income. We are talking about removing a discrimination which has existed for many years.

Mr. Cronin: I am glad that the hon. Member makes that point, because it brings me to something with which I intended to deal later in my speech.
I would like to refer to what the Chief Secretary said in his intervention. My hon. Friends will agree that he made it clear that he did not regard as sacrosanct the differential between earned income and investment income. When someone of the cagey breed of Chief Secretary makes a statement like that at the Dispatch Box, it implies to anybody who is familiar with the organisation of parliamentary business that there will certainly be preferential treatment for the receivers of investment income in the Finance Bill which eventually implements the unified taxation.
I am not surprised that the Chief Secretary should take that view, because here we have the hon. Member for St. Ives (Mr. Nott) pressing for it. I have no


doubt that a large number of hon. Members opposite will also press for it and I am sure that it would receive applause and immense thumping of feet in the 1922 Committee.

Mr. Nott: It would also be applauded by all those retired people who live on savings which they have accumulated during their working lives.

Mr. Cronin: The hon. Member is making some interesting points. The first thing to say in reply is that there is a case for having some band of investment income which pays a reduced rate of surcharge in future. But there is certainly no case for general preferential treatment for all receivers of investment income.

Mr. Nott: Mr. Nott rose—

Mr. Cronin: I cannot allow the hon. Gentleman to keep interrupting.

Mr. Peter Rees: Perhaps the hon. Gentleman would take us into his confidence and tell us what band of saving income he feels should be taxed at the same rate and receive what he calls preferential treatment.

7.0 p.m.

Mr. Cronin: That is either a rather naive question, or a stupendous tribute to my intellectual powers. These decisions are reached by the Chancellor of the Exchequer only after months of advice from his officials in the Treasury. Why should the hon. and learned Gentleman expect me to give such a figure across the Floor of the House at a moment's notice?

Mr. Peter Rees: It is not a question of what the Chancellor's calculations would be. The hon. Gentleman is giving the House his opinion and I should be grateful if he would take us into his confidence and let us know what he would regard as fair—because he is talking about social considerations—as the band of savings income which should not be discriminated against.

Mr. Cronin: I should say that there is a band of investment income which should reasonably be treated with some benevolence in the surcharge arrangements, but it would be absurd to attempt

to say now exactly what that band should be. However, I have in mind that there are people who live on investment income when they retire, who receive investment incomes as modest pensions, and who are entitled to some reasonable treatment. I condemn the Government for their intention to give to all recipients of investment income substantial help in the form of reduced surcharge, reduced in the sense of comparing it with the tax now paid on unearned income. I hope that the Chief Secretary will bear in mind that if he and his right hon. Friend attempt to introduce substantial benefits for recipients of investment income, they will meet strong opposition from this side of the House and from the country as a whole.
The Chief Secretary thought it rather odd that the Opposition had introduced Amendment No. 38 to reduce the basic rate from 30 to 20 per cent. No one would suggest that an Amendment, even from the Opposition Front Bench, must be taken as the tablets of stone coming down from Mount Sinai and therefore committing a future Government. It is generally accepted that the Amendment merely indicates that we feel that something should be done for those who pay income tax in the lower income bands. There is a considerable disincentive to those who start paying income tax at the very lowest level, because they lose social security and other benefits. This is something which the Government should consider, even if they do not accept the Amendment.
The hon. Member for St. Ives (Mr. Nott) is vehement about the importance of reducing taxation on investment income as an inducement to savings. An important feature of encouraging people to save is the rate of interest. Inflation is another. But the most important is probably the real income and the wealth of the prospective saver. There is no doubt that propensity to save increases enormously as the income of the prospective saver rises. Any attempt to link assistance to those on investment income with increasing savings is, therefore, a direct attempt to benefit the higher income groups.
The most important disincentive to savings is the appalling inflation which has rapidly increased since right hon.


Gentlemen opposite took charge of the affairs of the country.

Mr. Nott: Savings are going up.

Mr. Cronin: I do not accept that.

Mr. Nott: But they are.

Mr. Cronin: The first thing the Government have to do if they are to increase the incentive to save is to cope with the steady increase of prices and at least to make some sort of attempt to implement their unscrupulous election promises.

Mr. Barnett: We have had a reasonable debate with a brief and totally inadequate reply from the Chief Secretary to some excellent speeches from the Opposition, particularly from my hon. Friend the Member for Ashfield (Mr. Marquand), my hon. Friend the Member for Loughborough (Mr. Cronin), and my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin).
An interesting point emerged from the Chief Secretary's reply. It appeared that he was able to cost our Amendment, although his own scheme, which, we have been told, was prepared with such loving care and work for six years, has not been given any kind of figure. Although the Amendment was selected only yesterday, the Government have been able to say that it would cost £1,800 million to reduce the 30 per cent. rate to 20 per cent.—on the assumption that we were proposing that everyone now taxed at the standard rate should be taxed at 20 per cent., an absurd idea in any case.
The Chief Secretary criticised us for going back to a reduced rate band, but the Chancellor himself intends to have bands ranging, presumably, from 30 per cent. upwards, or at least so we understand to be the intention. It is difficult to understand why the Chief Secretary should have thought it strange that we should propose a rate band reduced from 30 per cent. to 20 per cent.
We seek clearly to differentiate between investment income and earned income. The Government scheme introduced by the Bill would be more complex than our suggestion if they felt that a small exemption, a modest slice, to use the Chancellor's words, of investment income should be exempted. If they kept it low, the scheme would be more

difficult and more administratively complex. The greater the exemption from the investment surcharge, the simpler it would be.
Our scheme would get away from that dilemma because we would have two rates, one for earned income one for investment income. The Government are not prepared to accept this and the major reason came out clearly in the debate. It is that they wish to remove as far as possible the distinction between earned and investment income. This is really what it is all about. It is no use the hon. Member for St. Ives (Mr. Nott) talking about savings income. What we are talking about in terms of real relief if we remove this distinction are people with very substantial amounts of capital which certainly cannot be saved by an average working man. The average working man can save very little after he has paid his tax. We are talking about relief on a substantial scale.
As my hon. Friend the Member for Llanelly (Mr. Denzil Davies) said this is a matter of priority. Even if there was some case, and I do not accept that there is, for encouraging savings on a blanket scale—this certainly was not accepted by the Royal Commission—the question of priorities as between earned and investment income remains.
What has emerged today is how far we have got from the days when the Government used to speak about having more open government. Those days have gone because it is clear that if they had wanted to tell us what sort of differential they had in mind it was open for them to do so. The excuse given by the Chief Secretary was a little odd, to say the least. He says that it cannot be done because it cannot be related to anything. Why not? We have a basic rate of 30 per cent. Why cannot it be related to that? That 30 per cent. rate is not a hard and fast rate for 1973–74. If he had wanted to tell us it was open to him to do so.
The hon. Gentleman used the argument about the need for more flexibility and demand management. It is interesting that the Chancellor needs more flexibility and room for demand management. With his present management of the economy he certainly needs some flexibility and he certainly needs to do something about demand management. When his judgment is proved wrong by everyone in the


country he is still not prepared to be flexible and to reflate the economy in such a way as to remove the present absurdly high level of unemployment. Now we are told this by the Chief Secretary—the Chancellor was not here and maybe he will have a word with his hon. Friend later. The hon. Gentleman says that he must refrain from telling us what the differential is likely to be, what the slice of investment income to be exempt will be, because the Chancellor needs the flexibility in a few years' time. The right hon. Gentleman is not using the flexibility which he has now. This is doing away with the whole concept of open government to give the Chancellor flexibility in managing the economy.
It is more than just flexibility that he needs, the Chancellor must recognise what is going wrong under the present management

of demand. We on this side condemn the Government for using this scheme in this way. We condemn the secrecy, when everything that has been said means that they really know what their intentions are about the differentiation between earned and investment income. We can only assume that they are not telling us because it involves a massive increase in the redistributive effect of taxation and it would therefore make them even more unpopular when the country begins to realise just what they are doing under the cloak of reform. It is for these reasons that I advise my hon. and right hon. Friends to support the Amendment.

Question put. That the Amendment be made:—

The House divided: Ayes 181, Noes 197.

Division No. 413]
AYES
[7.15 p.m.


Abse, Leo
Ford, Ben
Lyons, Edward (Bradford, E.)


Albu, Austen
Forrester, John
Mabon, Dr. J. Dickson


Allaun, Frank (Salford, E.)
Fraser, John (Norwood)
McBride, Neil


Allen, Scholefleld
Freeson, Reginald
McCann, John


Ashton, Joe
Galpern, Sir Myer
McCartney, Hugh


Atkinson, Norman
Gilbert, Dr. John
McGuire, Michael


Bagier, Gordon A. T.
Ginsburg, David
Mackenzie, Gregor


Barnett, Joel
Gordon Walker, Rt. Hn. P. C.
Mackie, John


Beaney, Alan
Gourlay, Harry
Maclennan, Robert


Bennett, James (Glasgow, Bridgeton)
Grant, George (Morpeth)
McMillan, Tom (Glasgow, C.)


Bidwell, Sydney
Griffiths, Eddie (Brightside)
McNamara, J. Kevin


Blenkinsop, Arthur
Hamilton, James (Bothwell)
Mahon, Simon (Bootle)


Boardman, H. (Leigh)
Hamilton, William (Fife, W.)
Mallalieu, J. P. W. (Huddersfield, E.)


Booth, Albert
Hamling, William
Marks, Kenneth


Buchan, Norman
Hannan, William (G'gow, Maryhill)
Marquand, David


Buchanan, Richard (G'gow, Sp'burn)
Hardy, Peter
Marsden, F.

Callaghan, Rt. Hn. James
Harrison, Walter (Wakefield)
Marshall, Dr. Edmund


Campbell, I. (Dunbartonshire, W.)
Heffer, Eric S.
Meacher, Michael


Cant, R. B.
Hooson, Emlyn
Mellish, Rt. Hn. Robert


Carmichael, Neil
Horam, John
Mendelson, John


Carter-Jones, Lewis (Eccles)
Huckfield, Leslie
Millan, Bruce


Castle, Rt. Hn. Barbara
Hughes, Rt. Hn. Cledwyn (Anglesey)
Milne, Edward (Blyth)


Clark, David (Colne Valley)
Hughes, Robert (Aberdeen, N.)
Mitchell, R. C. (S'hampton, Itchen)


Cocks, Michael (Bristol, S.)
Hughes, Roy (Newport)
Morris, Alfred (Wytnenshawe)


Cohen, Stanley
Hunter, Adam
Morris, Charles R. (Openshaw)


Concannon, J. D.
Irvine, Rt. Hn. Sir Arthur (Edge Hill)
Morris, Rt. Hn. John (Aberavon)


Corbet, Mrs. Freda
Jay, Rt. Hn. Douglas
Moyle, Roland


Cox, Thomas (Wandsworth, C.)
Jeger, Mrs. Lena (H'b'n amp; St. P'cras, S.)
Murray, Ronald King


Crawshaw, Richard
Jenkins, Rt. Hn. Roy (Stechford)
O'Halloran, Michael


Cronin, John
John, Brynmor
O'Malley, Brian


Crosland, Rt. Hn. Anthony
Johnson, Carol (Lewisham, S.)
Oram, Bert


Dalyell, Tam
Johnson, James (K'ston-on-Hull, W.)
Orme, Stanley


Davidson, Arthur
Johnson, Walter (Derby, S.)
Oswald, Thomas


Davies, Denzil (Llanelly)
Johnston, Russell (Inverness)
Owen, Dr. David (Plymouth, Sutton)


Davies, S. O. (Merthyr Tydvil)
Jones, Barry (Flint, E.)
Pardoe, John


Davis, Clinton (Hackney, C.)
Jones, Dan (Burnley)
Parker, John (Dagenham)


Davis, Terry (Bromsgrove)
Jones, Rt. Hn. Sir Elwyrv (W. Ham, S.)
Parry, Robert (Liverpool, Exchange)


Dempsey, James
Jones, Gwynoro (Carmarthen)
Pavitt, Laurie


Doig, Peter
Jones, T. Alec (Rhondda, W.)
Pendry, Tom


Douglas-Mann, Bruce
Kaufman, Gerald
Pentland, Norman


Driberg, Tom
Kinnock, Neil
Perry, Ernest G.


Duffy, A. E. P.
Latham, Arthur
Price, J T. (Westhoughton)


Dunn, James A.
Lawson, George
Price, William (Rugby)


Dunnett, Jack
Leadbitter, Ted
Probert, Arthur


Eadie, Alex
Lee, Rt. Hn. Frederick
Rees, Merlyn (Leeds, S.)


Edwards, Robert (Bilston)
Leonard, Dick
Richard, Ivor


Evans, Fred
Lestor, Miss Joan
Roberts, Rt. Hn. Goronwy (Caernarvon)


Fernyhough, Rt. Hn. E.
Lever, Rt. Hn. Harold
Rodgers, William (Stockton-on-Tees)


Fisher, Mrs. Doris (B'ham, Ladywood)
Lomas, Kenneth
Roper, John


Fietcher, Ted (Darlington)
Loughlin, Charles
Rose, Paul B.




Ross, Rt. Hn. William (Kilmarnock)
Stewart, Rt. Hn. Michael (Fulham)
Weitzman, David


Sandelson, Neville
Stoddart, David (Swindon)
White, James (Glasgow, Pollok)


Sheldon, Robert (Ashton-untler-Lyne)
Strang, Gavin
Whitehead, Phillip


Shore, Rt. Hn. Peter (Stepney)
Summerskill, Hn. Dr. Shirley
Willey, Rt. Hn. Frederick


Silkin, Rt. Hn. John (Deptford)
Taverne, Dick
Williams, W. T. (Warrington)


Silkin, Hn. S. C. (Dulwich)
Thomas, Rt. Hn. George (Cardiff, W.)
Wilson, Rt. Hn. Harold (Huyton)


Skinner, Dennis
Tinn, James
Woof, Robert


Small, William
Tomney, Frank



Smith, John (Lanarkshire, N.)
Urwin, T. W.
TELLERS FOR THE AYES:


Stallard, A. W.
Varley, Eric G.



Steel, David
Walker, Harold (Doncaster)
Mr. Donald Coleman and


Stewart, Donald (Western Isles)
Watkins, David
Mr. John Golding.




NOES


Adley, Robert
Gower, Raymond
Parkinson, Cecil (Enfield, W.)


Allason, James (Hemel Hempstead)
Grant, Anthony (Harrow, C.)
Percival, lan


Archer, Jeffrey (Louth)
Gray, Hamish
Pike, Miss Mervyn


Astor, John
Green, Alan
Pounder, Rafton


Atkins, Humphrey
Grieve, Percy
Powell, Rt. Hn. J. Enoch


Awdry, Daniel
Gummer, Selwyn
Price, David (Eastleigh)


Baker, Kenneth (St. Marylebone)
Hall, Miss Joan (Keighley)
Pym, Rt. Hn. Francis


Balniel, Lord
Hall, John (Wycombe)
Quennell, Miss J. M.


Barber, Rt. Hn. Anthony
Hamilton, Michael (Salisbury)
Raison, Timothy


Batsford, Brian
Hannam, John (Exeter)
Rawlinson, Rt. Hn. Sir Peter


Berry, Hn. Anthony
Harrison, Col. Sir Harwood (Eye)
Redmond, Robert



Haselhurst, Alan



Biffen, John
Hawkins, Paul
Reed, Laurance (Bolton, E.)


Biggs-Davison, John
Hayhoe, Barney
Rees, Peter (Dover)


Blaker, Peter
Higgins, Terence L.
Rees-Davies, W. R.


Boardman, Tom (Leicester, S. W.)
Holt, Miss Mary
Ridley, Hn. Nicholas


Body, Richard
Hicks, Robert
Ridsdale, Julian


Boscawen, Robert
Hordern, Peter
Rossi, Hugh (Hornsey)


Bossom, Sir Clive
Hornsby-Smith, Rt. Hn. Dame Patricia
Russell, Sir Ronald


Bowden, Andrew
Howe, Hn. Sir Geoffrey (Reigate)
Sandys, Rt. Hn. D.


Brinton, Sir Tatton
Howell, Ralph (Norfolk, N.)
Scott-Hopkins, James


Brocklebank-Fowler, Christopher
Hunt, John
Sharples, Richard


Brown, Sir Edward (Bath)
Hutchison, Michael Clark
Shaw, Michael (Sc'b'gh amp; Whitby)


Buchanan-Smith, Alick (Angus, N amp; M)
Irvine, Bryant Godman (Rye)
Shelton, William (Clapham)


Buck, Antony
Jenkin, Patrick (Woodford)
Sinclair, Sir George


Bullus, Sir Eric
Jessel, Toby
Skeet, T. H. H.


Burden, F. A.
Kellett-Bowman, Mrs. Elaine
Smith, Dudley (W'wick amp; L'mington)


Butler, Adam (Bosworth)
Kilfedder, James
Soref, Harold


Cary, Sir Robert
Kimball, Marcus
Speed, Keith


Channon, Paul
King, Evelyn (Dorset, S.)
Spence, John


Chapman, Sydney
Kinsey, J. R.
Sproat, lain


Chichester-Clark, R.
Knight, Mrs. Jill
Stainton, Keith


Clarke, Kenneth (Rushcliffe)
Knox, David
Stanbrook, Ivor


Clegg, Walter
Legge-Bourke, Sir Harry
Stewart-Smith, D. G. (Belper)


Cockeram, Eric
Lloyd, Ian (P'tsm'th, Langstone)
Stokes, John


Cooke, Robert
Longden, Gilbert
Stuttaford, Dr. Tom


Coombs, Derek
Loveridge, John
Sutcliffe, John


Cooper, A. E.
Luce, R. N.
Tapsell, Peter


Cordle, John
MacArthur, Ian
Taylor, Edward M. (G'gow, Cathcart)


Corfield, Rt. Hn. Frederick
Maclean, Sir Fitzroy
Taylor, Robert (Croydon, N. W.)


Cormack, Patrick
McMaster, Stanley
Tebbit, Norman


Costain, A. P.
Macmillan, Maurice (Farnham)
Temple, John M.


Critchley, Julian
McNair-Wilson, Patrick (New Forest)
Thompson, Sir Richard (Croydon, S.)


Crouch, David
Maddan, Martin
Trafford, Dr. Anthony


Curran, Charles
Madel, David
Turton, Rt. Hn. Sir Robin


Davies, Rt. Hn. John (Knutsford)
Maginnis, John E.
van Straubenzee, W. R.


d'Avigdor-Goldsmid, Sir Henry
Marten, Neil
Vaughan, Dr. Gerard


d'Avigdor-Goldsmid, Maj.-Gen. Jack
Mather, Carol
Vickers, Dame Joan


Dixon, Piers
Maude, Angus
Waddington, David


Dodds-Parker, Douglas
Meyer, Sir Anthony
Walder, David (Clitheroe)


Douglas-Home, Rt. Hn. Sir Alec
Mills, Stratton (Belfast, N.)
Walker, Rt. Hn. Peter (Worcester)


du Cann, Rt. Hn. Edward
Mitchell, Lt.-Cot. C. (Aberdeenshire, W
Walters, Dennis


Eden, Sir John
Mitchell, David (Basingstoke)
Ward, Dame Irene


Edwards, Nicholas (Pembroke)
Moate, Roger
Warren, Kenneth


Elliot, Capt. Walter (Carshalton)
Molyneaux, James
Weatherill, Bernard


Eyre, Reginald
Monks, Mrs. Connie
Wells, John (Maidstone)


Farr, John
Monro, Hector
Whitelaw, Rt. Hn. William


Fell, Anthony
Montgomery, Fergus
Wiggin, Jerry


Fenner, Mrs. Peggy
Morrison, Charles (Devizes)
Wilkinson, John


Finsberg, Geoffrey (Hampstead)
Mudd, David
Wolrige-Gordon, Patrick


Fisher, Nigel (Surbiton)
Murton, Oscar
Wood, Rt. Hn, Richard


Fookes, Miss Janet
Nabarro, Sir Gerald
Woodhouse, Hn. Christopher


Gilmour, Ian (Norfolk, C.)
Normanton, Tom
Wylie, Rt. Hn. N. R.


Gilmour, Sir John (Fife, E.)
Nott, John



Glyn, Dr. Alan
Oppenheim, Mrs. Sally
TELLERS FOR THE NOES:


Goodhart, Philip
Owen, Idris (Stockport, N.)



Goodhew, Victor
Page, Graham (Crosby)
Mr. Tim Fortescue and


Gorst, John
Page, John (Harrow, W.)
Mr. Jasper More.

Schedule 6

AMENDMENTS CONSEQUENTIAL ON NEW METHOD OF CHARGING TAX

Mr. Patrick Jenkin: I beg to move Amendment No. 40, in page 77, leave out lines 17 to 28.
In Committee, we amended paragraphs 67 and 68 of the Schedule which dealt with the proper treatment of covenants under the unified tax. As a consequence, we are now able to amend paragraph 26, which deals with net relevant earnings for the purposes of retirement annuities. This is a simplification, and I commend it to the House.

Amendment agreed to.

Schedule 7

NEW METHOD OF CHARGING TAX—TRANSITIONAL PROVISIONS

Mr. Patrick Jenkin: I beg to move Amendment No. 41, in page 88, line 20, leave out paragraph 2 and insert:
2.—(1) Where any provision, however worded, contained in an instrument (of whatever nature) made on or after 3rd September 1939 or in a will or codicil taking effect on or after that date provides for the payment, whether periodically or otherwise,—

(a) of a stated amount free of income tax other than surtax; or
(b) of an amount which, after deduction of income tax at the standard rate, is equal to a stated amount;
it shall have effect as follows.
(2) If it is such a provision as is mentioned in sub-paragraph (1)(a) above it shall have effect as if it provided for the payment of the stated amount free of income tax other than such as exceeds the amount to which the person to whom the payment is made would be liable if all income tax were charged at the basic rate to the exclusion of any other rate.
(3) If it is such a provision as is mentioned in sub-paragraph (1)(b) above, it shall have effect as if it provided for the payment of an amount which, after deduction of income tax at the basic rate, is equal to the stated amount.
This is a complex matter with which I shall try to deal in two or three sentences.
It refers to the question of covenants which are expressed in one form or another to be free of tax. Chancery lawyers in the House will be familiar with the hideous complications of what is known as the rule in re Pettit. As the Clause

was originally drawn, it had the effect of turning all free-of-tax covenants into covenants which would be unaffected by the rule in re Pettit. This was not our intention. Therefore, we have redrawn the Clause so that the covenants will continue to be interpreted as though they were in re Pettit covenants or other covenants—for instance, expressed in the form of such a sum as after the deduction of tax at the basic rate would amount to the given sum.
This is a technical matter which arises betwen annuitants and trustees. I think that the Clause as it will be if the Amendment is accepted will meet the purpose. However, I recognise that because this is a complex matter there may well be room for more than one view. We can, if necessary, have a second bite at it if during the year further consultations suggest that even now we do not have it absolutely right.

Amendment agreed to.

Clause 37

APPLICATION OF NEW SYSTEM

Mr. Maurice Macmillan: I beg to move Amendment No. 42, in page 33, line 25, leave out from 'person' to 'are' in line 28 and insert:
'on the provision of second-hand machinery or plant if capital expenditure on providing the machinery or plant was incurred by another person before the said 27th October and—

(a) he and that other person'.

Mr. Speaker: It will be convenient also to discuss the Amendments Nos. 43 and 44.

Mr. Macmillan: These Amendments slightly modify the starting rules for the new code of capital allowances.
The general rule is that the new code applies to capital expenditure on plant and machinery incurred on or after 27th October and that this is so whether the plant and machinery is then new or second-hand. There is a need, therefore, to safeguard the Exchequer against artificial transactions in second-hand assets, and subsection (2) of the Clause provides those safeguards.
The intention is that if second-hand plant and machinery is bought on or after 27th October in an arm's length


transaction, the new allowances will apply. But if the plant or machinery on which the expenditure is being written down at the old rates is transferred to an associated or connected company, they will not apply.
However, further examination of the Clause has revealed some minor defects. As it was drawn, a third company could be wrongly deprived of the benefit. Also, subsection (2) did not cover the possibility that a company owning machinery bought before 27th October might transfer it, not on an outright sale but by some other transaction, such as hire purchase, and it was necessary to bring hire purchase in as well as outright sale. Amendments Nos. 42 and 43 remedy these defects.
Amendment No. 44 deals with another point. The new allowances do not apply where plant or machinery is being bought on hire purchase and where the first instalment has been incurred and the asset brought into use before 27th October, 1970, by the hire purchaser. But subsection (3), which provides for this, goes rather too far. It could unnecessarily deprive the hire purchaser of a second-hand asset of the new allowances because someone else had had it in use before 27th October. That is clearly wrong and Amendment No. 44 corrects it.
These are tidying-up Amendments which restore to the Clause the function it was originally supposed to have.
Amendment agreed to.
Amendments made: No. 43, in page 33, line 30, leave out from 'the' to 'is' in line 31 and insert:
'tranaction under which the first-mentioned expenditure is incurred, or with respect to transactions of which it'.
Amendment No. 44, in page 33, line 41, leave out 'has not been used before' and insert:
'is first brought into use by that person on or after'.—[Mr. Maurice Macmillan.]

Clause 39

FIRST-YEAR ALLOWANCES—RATES

7.30 p.m.

Mr. Cranky Onslow: I beg to move Amendment No. 45, in page 35, line 3, at end insert 'aircraft, or'.
If I may paraphrase the famous remark, I have not had time to prepare a short speech, but I do not wish to make a long one. I am certain that, even on so important a matter as aviation, the House does not wish to be detained for long and I would hate to disoblige hon. Members. This is a subject on which my hon. Friend on the Front Bench and I have been in correspondence. My purpose in putting down the Amendment, which I am well aware is imperfect, as all my Amendments are, is to give him the opportunity to answer one or two questions.
I am sure that he knows that the collective voice of aircraft manufacturers and British aerospace companies would welcome any Amendment to the Finance Bill which would give the United Kingdom operators a free hand in the depreciation of their aircraft. They take the view that it is illogical that aircraft operators should be treated less well than the shipping industry, which is now to be allowed free depreciation.
This subject was considered by the Edwards Committee in a different context at a time when investment grants existed. The conclusions of the Committee in paragraph 831 of its Report were that the Committee understood that the airline industry was excluded from the investment grants scheme because about three-quarters of the industry was nationalised and all transport except shipping was excluded from the scheme. The Committee did not believe, even if it were right to exclude nationalised industries, that it was sensible that there should be this distinction. The Report said specifically:
We do believe that United Kingdom air transport, which is predominantly international in character, is more comparable to shipping than to other forms of transport.
It is for this reason that I seek to persuade my hon. Friend to agree in principle at least that it is desirable for aviation and shipping to be treated on equal terms for the purposes of depreciation. If an Amendment were to be incorporated in a future Bill, supposing it cannot be made in this one, there would be a need for safeguards, and it would probably be necessary to restrict the enjoyment of free depreciation to aircraft which were employed solely on air transport services as defined under the Civil


Aviation Bill, or something of that nature. Nevertheless, I hope my hon. Friend will understand that in the independent sector of British aviation there is a general desire that something should be done to increase its competitive ability around the world. If some additional financial advantage can be given to the independent sector comparable to that which is enjoyed by the United Kingdom shipowners this would be extremely welcome. It would, of course, be the independent operators who would principally benefit from it.
My hon. Friend may say that a great deal has been done for the independents in the Civil Aviation Bill, but it is equally fair to remind the House that the consequence of that Bill and other recent developments, is that the costs which have to be borne by operators have increased. This is true in the sphere of international competition, and also domestically. Fuel costs have gone up and they may go up again. Operators face the burden of the administrative charges of the Civil Aviation Authority and of gradually working towards a situation where the whole share of air traffic control costs which is attributable to British operators will be borne by the airlines. There is in addition the considerable bill which will accrue for airport costs which—and I am sure my hon. Friend the Member for Horsham (Mr. Hordern) will not mind my reminding the House—are made all the greater by the fact that the new airport will be at Foulness instead of Gatwick.
Faced with these considerable costs, some applying only in the United Kingdom sector, which are borne by United Kingdom operators and not by their competitors, I hope my hon. Friend will agree that it is illogical for the Government to encourage the spread of airline operation and at the same time fail to provide equal opportunities in this Bill for airlines and shipowners. I hope that my hon. Friend will give an encouraging response.

Mr. Dalyell: I agree with the hon. Member for Woking (Mr. Onslow) that when one compares the advantages that accrue to certain foreign operators with those that accrue to British operators one realises that foreign Governments give help to their airlines which ours do not

get. I therefore think that there is the beginning of a good case, but I also believe that the case should be carried a bit further.
One of the troubles in the aircraft manufacturing industry in recent years has been that it has had hardly any interim payments from operators. Therefore, any advantage that can be given to the operators to enable them to make interim payments on time to manufacturers would help the liquidity of the manufacturers and prevent the manufacturers from using sub-contractors for banking purposes. One feature which emerged from the recent Rolls-Royce problems is the extent to which that company used its sub-contractors for banking facilities. This general problem that surrounds the whole of the aircraft industry could well be taken into account by the Treasury when it formulates policy in this area.

Mr. Norman Tebbit: I will not repeat the arguments which my hon. Friend the Member for Woking (Mr. Onslow) has put so well. Reaching back in my memory to the time when I was an officer cadet and having the mysteries of the Royal Air Force Act, Q.R.s and A.C.I.s explained to me, I am reminded that therein is a classical definition of a horse. A horse, I discovered, was a horse or any creature doing the work of a horse. I ask my hon. Friend to look again at the Bill in that context and realise that whatever is good for a ship or for a shipping interest is equally good for an aircraft or an aircraft operating interest. Very often we find that the same operators are involved in operating those two different types of vehicle carrying similar payloads to similar parts of the world. In all common sense in 1971 there is no need for the implied distinction between one sort of horse and another.

Mr. Stanley R. McMaster: The Bill has changed for the worse the position of aircraft operators. The change in the capital allowance pattern moves aircraft from the previous 50, 20 and 10 per cent. structure to a higher 60, 10 and 7½per cent. profile. I remind my hon. Friend that the aircraft industry is an internationally competitive industry. The operators, whether the State corporations or the independents, are competing


against other airlines, often prestige airlines, which are supported for nationalistic reasons by their Governments. Their position is analogous to that of ships and any advantage which is provided for our shipping interests should equally be extended to aircraft operators. It is in the national interest not only of the aircraft operators but also of the aircraft manufacturers. The aircraft industry as a whole is going through a recession and there may, therefore, be no immediate advantage in the Amendment.
I urge my hon. Friend to consider the long-term interests of the British aerospace industry. The fact that few profits are being earned at the moment is not relevant in the long term. One hopes that an increase in air traffic will mean an early return to profitability and that the allowances which we suggest will be of considerable benefit to our airline operators. For these reasons I strongly urge my hon. Friend to look sympathetically at this Amendment.

Mr. Maurice Macmillan: My hon. Friend the Member for Woking (Mr. Onslow) said that some safeguards would be necessary in relation to this Amendment, and perhaps I could deal with that relatively minor point first. It will be recalled that we had considerable discussion in Committee about the benefit of accelerated depreciation allowances, and leasing arrangements in regard to foreign airlines. After some deliberation the Committee agreed that this was a matter which could be controlled through balance of payments means. What my hon. Friend proposes in his Amendment would considerably increase the incentive, and no doubt the complexity, in dealing with this particular problem. I thank him for recognising that there are difficulties involved in this problem.
On the matter of principle, aircraft have never had free depreciation nor, unlike ships, have they qualified for investment grant. In making the comparison between aircraft and ships, one must remember that ships were first given free depreciation in 1965. That decision was related to the introduction of corporation tax in that year, the effect of which would, it was then considered, be especially unfavourable to shipping companies. But, quite apart from that, British shipowners are subject to competition from ships

registered in flag-of-convenience countries whose owners are thereby in a position to enjoy special tax advantages.
The hon. Member for West Lothian (Mr. Dalyell) suggested that foreign competitors of our airline operators were enjoying similar tax and other advantages, whether by direct or indirect assistance, through Government or in other ways. I agree that we must look into this matter to see whether there has been any unfair competition with which our British operators are faced, particularly in regard to freight-carrying, in the same way as flag-of-convenience and other methods provide unfair competition for our shipping operators.
The hon. Gentleman also asked me to look further into the question of liquidity and any direct help that might be given to aircraft manufacturers in the form of interim payments. I would point out that the habit of larger businesses partially financing themselves by not paying their bills is not confined entirely to the aircraft industry.
My hon. Friend the Member for Woking mentioned other special costs which were peculiar to airline operations, particularly in regard to the independent companies. He also referred to difficulties facing the United Kingdom operators.
For all these reasons which have been given, I feel that this matter should be looked at in the coming months with considerable care. I am sure my hon. Friend will not expect me to give any sort of undertaking about this matter, but clearly the development of air transport is a matter of extreme importance for the future. It is equally important that our airline operators should not be faced with unfair competition, and this clearly is a matter that should be considered in relation to the whole fiscal structure.

Mr. Onslow: I thank my hon. Friend for that reply, which is sympathetic in tone and encouraging in content. Since he shows such willingness to continue with the correspondence which has passed between us during the past months, I shall respond by bombarding him with many more tons of paper. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

7.45 p.m.

Mr. Peter Hordern: I beg to move Amendment No. 127, in page 35,


line 19, leave out from ' purposes ' to end of paragraph (iii).
This is a simple Amendment concerning free depreciation in the development areas. In the past it has been the practice in development areas to allow free depreciation on all new plant and machinery, respective of where it happens to be sited; but there is a bar in this Clause which confines such new plant and machinery to factories and industrial buildings generally. If the new plant and machinery happens to lie in dwelling houses, retail shops, showrooms, hotels and offices it does not qualify for free depreciation.
I wish to ask my hon. Friend why it has been thought necessary to confine the objective of free depreciation to machinery in a factory or industrial building. I see no good reason for so confining it, and I hope that my hon. Friend will be able to explain the situation.

Mr. Patrick Jenkin: I can respond to my hon. Friend's request by explaining the purpose of the provision. The first 100 per cent. first-year allowance applies to expenditure incurred by industrial firms in development areas broadly on industrial plant and machinery, that is to say plant and machinery for use in the productive processes carried on in development areas. It does not apply, and was never intended to apply, to plant and machinery used either in the service industries or in service activities of industrial firms.
There are many manufacturing firms which carry out service activities or activities which overlap into the service sector, For instance, one has in mind sales and administrative organisations quite separate from the factory. There may be wholesale or retail showrooms; there may even be a chain of retail establishments for selling products directly to the consumer. These are all service activities and it is not the Government's intention that the 100 per cent. first-year allowance should apply to those activities.
We need some relatively simple rule to determine whether a particular item of plant and machinery qualifies for the allowance as being industrial plant or whether it does not qualify in that it is being used in the service side of the firm's activities. Here we have adopted—this is where I part company with my hon. Friend—exactly the same rule which

applied and, so far as I am aware, applied successfully and without creating any difficulties when free depreciation existed before 1964–65 in the development areas. The rule is to look at the nature of the building in which the plant or machinery is to be housed. If the building is an "industrial building"—I put those words in inverted commas because it is a term of art derived from Section 7 of the Capital Allowances Act—the 100 per cent. first year allowance applies. If the building is not an industrial building, the allowance does not apply.
I have no reason to suppose that the application in this new context of the existing distinction between industrial and non-industrial buildings will cause any difficulties. If we were to abandon the distinction and accept the Amendment, we would arrive at the strange and anomalous result which I can best illustrate with an example. Let us suppose that in a town in a development area there is a factory which makes boots and shoes and which also, in the same town, runs two or three retail establishments which directly sell the boots and shoes to the customer. If there is then industrial plant and machinery in those shops, because it is an industrial concern it would receive the 100 per cent. allowance. But those shops might well be in direct competition with independent boot and shoe retailers which might have exactly the same pieces of plant and machinery, which, for instance, might be shoe repairing machinery of one sort or another, and yet, because they were not operated by an industrial concern operating in a development area, they would not be entitled to the first year allowance. Perhaps that is a homely and over-simplified example, but I am sure that my hon. Friend can readily think of other examples where the anomaly might be more serious.
Therefore, we have to have a test which establishes whether or not the plant or machinery qualifies for this valuable 100 per cent. first year allowance. We do not consider it right that the fiscal system should be used to distort competition in the way I have described. It should be a test which is simple to administer. The test which is to be found in paragraph 3, which the Amendment proposes to leave out, is a satisfactory one which worked satisfactorily before


when we had free depreciation, and we have no reason to believe that it will not work equally satisfactorily again with the new 100 per cent. first year allowance.
Having heard my explanation, I hope that my hon. Friend will not wish to press his Amendment.

Mr. Dalyell: I share the curiosity of the hon. Member for Horsham (Mr. Hordern) about this subject. Without making too much of an issue of it, I reflect that night after night we used to hear from the Conservative Scottish Opposition, as they then were, some pretty strident speeches about how the service industries were being discriminated against. In a sense, the then Opposition were right to make those speeches because it is undoubtedly true that some areas are almost by definition discriminated against by this kind of legislation, especially the Scottish Highlands. I do not pretend that it is a very serious matter in West Lothian. But if they were present, the hon. Member for the Western Isles (Mr. Donald Stewart) or my hon. Friend the Member for Enfield, East (Mr. Mackie), who knows the North of Scotland very well, would bear me out in saying that there are a lot of very small scale industries which do not function in a building the nature of which can be called "industrial" and which would not fit this kind of definition.
Just as the Financial Secretary's hon. Friends had a point when in Opposition, so I suspect that in putting forward this kind of case I have a point tonight. It may be an administratively simple distinction to make, and having said more about administration in discussing the Finance Bill than practically any other back bench Member, I realise that this is a very real kind of argument.
If we do not press it this year, I hope that the Treasury will at least reflect and will talk to the Highlands and Islands Development Board in the hope that in the coming year they can come up either with a more liberal attitude to these matters or some other definition to help those in small cottage industries, who are often the people who need the most help.

Mr. James Dempsey: After listening to the Minister, I feel that there is a need for further

clarification on the attitude that he has adopted. He went a long way to explain how this particular depreciation allowance applied to industry. He gave an illustration of the boot manufacturer also selling boots which aroused my curiosity.
I found it very difficult to follow the argument at that stage, that although whatever was happening was in the manufacturing sphere and it involved a retail shop, I gained the impression that such would be entitled to free depreciation allowance. This should be made a little clearer, because it is a bone of contention in my area, which is a development area.
I draw the Minister's attention to my experience in dealing with a somewhat similar problem. I was concerned with a manufacturing industry. I do not yet know whether the Minister's interpretation of an "industrial undertaking" applies to a manufacturing industry. He did not make that clear. He explained that industry was an industrial undertaking and that the depreciation allowance would apply to such an industrial form of activity if it were in a development area. But, rightly or wrongly, I understand that the allowance did operate for manufacturing industries. I am very much concerned with manufacturing activities, not necessarily industrial production. I have always had the impression that manufacturing qualified. I was surprised to learn that manufacturing did qualify, but provided that the equipment was installed in the manufacturing factory. I ask the Minister to consider this point.
The equipment necessary for this manufacturing factory, which keeps scores of people in employment in my area, had to be installed in a retail unit. The purpose of installing it in a retail unit was so that it would come into operation if the equipment in the manufacturing factory broke down and threw 50 or 60 men out of work. The equipment was being used primarily for manufacturing purposes, although it was installed in the retail section of the operations. After a spate of meetings with Ministers in Scotland, and a Minister of my Labour Government, a very fine definition was given that, although the equipment would be used for manufacturing purposes, because it was installed in a retail unit it would not qualify for the allowances that were operating under the Labour Government.
This is somewhat in conflict with what the Financial Secretary has just said. He spoke of a boot manufacturer and related it to the retail sale of such a commodity, saying that even if it was complementary, in so far as it manufactured for sale and was associated with the retail unit, it would qualify for the depreciation allowance.
I should like the Minister to compare my experience with what he has said. I was told unequivocally by the then Minister that as this manufacturing plant was installed in a retail unit as a duplicate to that in the manufacturing unit, it did not qualify. The manufacturer lost a fair sum of money because he was refused the ordinary grants, for example, for equipment for this particular purpose. While the hon. Gentleman is dealing with depreciation allowances, I can understand it. But I am attempting to have defined the principle that equipment established in a retail unit for the purpose of manufacture qualifies for the depreciation allowances that we are discussing.
When my constituent hears about the illustration given by the hon. Gentleman tonight, he will make further representations. Quite rightly, he will ask why, when he provides manufacturing equipment in the retail part of his business with a view to keeping men in jobs, he is not allowed financial assistance from the Treasury.
I should be grateful if the hon. Gentleman would look at the point again and give me some further clarification about whether, on the illustration that he has just given the House, the manufacture qualifies for the allowance. Certainly that will enable me to explain to my constituent and others who have similar interests where depreciation allowances will be granted and where they will be refused.

8.0 p.m.

Mr. Patrick Jenkin: With the leave of the House, perhaps I might reply briefly to the points made by the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) and the hon. Member for West Lothian (Mr. Dalyell).
I deal first with the speech that we have just heard. Broadly, the position is as the hon. Member for Coatbridge and Airdrie has stated. If this was machinery installed in a retail establishment, it would be covered by the rule

which I outlined a few moments ago. But that is not necessarily the end of the matter. The Inland Revenue is always prepared to look at a building with a view to seeing whether part might be treated as a retail establishment and part as an industrial building. If the industrial plant is in the part treated as an industrial building, it will qualify for the 100 per cent. first-year allowance. On the facts as stated by the hon. Gentleman, it is not possible to determine whether that would be right. But perhaps I might invite him to follow up the matter, as he suggested his constituent might, and to draw the case to my attention, in which event I shall ensure that it is looked at urgently and with sympathy. Naturally, we are anxious wherever possible to help firms in development areas to qualify for the allowances in respect of the industrial plant that they buy.
In response to the hon. Member for West Lothian, it is fair to point out—I do it in no party sense—that the distinction between now and the period to which he referred is that, whereas the industrial plant in the development area was entitled to the higher rate of grant and to the depreciation allowances, the service plant in the development area lost the former investment allowances and got nothing else. It was reduced to the straight initial allowance of 30 per cent. and an ordinary depreciation. We have made sure, at any rate, that service industries and service plant in manufacturing industries is entitled to the 60-year accelerated write-off and the 25 per cent. after that. We have restored a valauble capital allowance to the service industries and, although there is still a margin between industrial plant which qualifies for the 100 per cent. first-year allowance and the rest, it is nothing like as wide as it was.
I am glad to say that the change has been warmly welcomed by the service industries in the development areas and elsewhere. But I take the hon. Gentleman's point that there may be cases similar to that referred to by his hon. Friend where industrial plant is not in an industrial buildling. As I have said, the Inland Revenue is always prepared to see whether there is ground for justifying the division of a building into industrial and non-industrial parts, so that the plant in the industrial part qualifies for the allowance. Of course, if less than 10 per cent.


of the building is used for service purposes, the whole building is treated as industrial.

Mr. Hordern: My hon. Friend the Financial Secretary has been extremely helpful in providing an illustration. Obviously there will be anomalies and difficulties in carrying out this policy, but I am sure that they will be looked at sympathetically.
As this is the last non-Government Amendment, perhaps I might be allowed to congratulate my right hon. and hon. Friends, the Chief Secretary, the Financial Secretary and the Minister of State and to thank them for their answers to the many Amendments that my hon. Friends and I have tabled. Indeed, we on this side of the House have tabled more Amendments than right hon. and hon Gentlemen opposite. We are grateful to my right hon. and hon. Friends on the Treasury Bench for their perseverance and for their helpful replies. We are perhaps even more grateful to the Whips for allowing so many Amendments to be tabled and discussed at such great length.
In view of the reply of my hon. Friend the Financial Secretary, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Maurice Macmillan: I beg to move, Amendment No. 46, in page 36, line 5, at end insert:
'(d) in the construction, alteration or demolition of buildings or other fixed works of construction or civil engineering, including roads, or'.
The purpose of the Amendment is to remove any possible doubt that the building and civil engineering industries will qualify for free depreciation on expenditure on immobile plant and machinery used in development areas and in Northern Ireland. Clause 39 provides for free depreciation for such plant and machinery used for industrial purposes in these areas.

Mr. Barnett: Is not the phrase "free depreciation" something of a misnomer? It is not free depreciation at all.

Mr. Macmillan: I was using a shorthand phrase for the 100 per cent. first year allowance.
"Industrial purposes" are defined to include the purposes of any trade which consists in
… the manufacture of goods or materials or the subjection of goods or materials to any process".
The scope of the latter words is very wide and would appear to include almost everything done in the course of building or civil engineering work. But doubts have been expressed on behalf of the industry whether all its activities are included, as was intended. For example, simple earth-moving could be argued not to be the subjection of any materials to a process. The Amendment removes these doubts and uses words which should make the position clear.

Amendment agreed to.

Clause 41

WRITING-DOWN ALLOWANCES AND BALANCING ADJUSTMENTS

Mr. Patrick Jenkin: I beg to move Amendment No. 48, in page 38, line 21, leave out from beginning to 'period' in line 23 and insert:


'(a) belongs to him at some time in the chargeable period or its basis period, and
(b) is in that period, or has at any previous time been, in use for the purposes of the trade, and
(c) in that'.
Perhaps it will be convenient to discuss at the same time the related points in Amendment No. 49.

The Amendments are moved to correct a number of minor errors in drafting, and they deal with the "disposal value" of machinery and plant which ceases to be used in the taxpayer's trade.

Amendment No. 48 covers the point where an asset can be taken out of use in one year with the intention that it should come back into use later. In fact, if it never comes back into use and is then sold, as the Bill stands, it would come into the pool, since it was not in use at the time of the disposal. Clearly, it should do, and the Amendment puts the position right.

Amendment No. 49 makes it clear that disposal value has to be brought in only when the asset permanently ceases to be used. As the Clause stands, it implies that disposal value should be brought in


on a temporary cessation of use. That was not our intention, and again the Amendment puts the position right.

Amendment agreed to.

Amendment made: No. 49, in line 25, leave out 'ceases (whether because of the permanent' and insert:
'permanently ceases (whether because of the '.—[Mr. Patrick Jenkin.]

Clause 42

MACHINERY AND PLANT ON HIRE-PURCHASE ETC.

Mr. Higgins: I beg to move Amendment No. 50, in page 40, line 31, leave out 'had' and insert 'has'.
This is the Amendment which corrects a typographical error. I was one jump ahead on the last Amendment.

Amendment agreed to.

Clause 43

MACHINERY AND PLANT ON LEASE

Mr. Higgins: I beg to move Amendment No. 51, in page 40, line 32, after 'is', insert 'first'.
I think that it would be for the convenience of the House if with this Amendment we took Amendments Nos. 53 and 54, if that is agreeable.

Clause 43 reforms the rules for giving capital allowances on leased machinery and plant, giving the allowances on each asset to the person, whether lessor or lessee, who actually incurs the expenditure on it, a result which has not always followed, as I explained in Committee, under the existing law. Examination of the Clause has, however, revealed a defect in the new scheme which the three Amendments are designed to cure.

Clause 43(2) provides for the case in which the expenditure is incurred by the lessee. The most common case of this is the long lease of a building with an obligation on the lessee to replace, as they wear out, various items of plant—for example, lifts, central heating boilers, and so on—installed in the building. Clause 43(2) gives the lessee the title to allowances on any item which he replaces by treating it as if it belonged to him so long as it is in use for the purposes

of his trade. That is the crucial point. But in reality the replacement item does not belong to the lessee; it becomes the property of the lessor, to whom it has to be surrendered at the end of the lease.

The Clause as it stood recognised this by providing that, on determination of the lease, no disposal value was to be brought into account against the lessee. So far as it went, that was right, but at the end of the lease the lessor has acquired a possibly valuable piece of plant or machinery which, if he wishes, he can dispose of. Since he had not incurred the capital expenditure on the plant or machinery, there was nothing in the Clauses as they stood to require him to bring into account any disposal value if he disposes of it.

Amendment No. 54 remedies this situation by providing that, from the determination of the lease, the provisions about disposal value are to have effect as if the capital expenditure on the replacement had been incurred by the lessor, not the lessee. From that time anything which the lessor receives for the disposal of the plant or machinery will reduce the value of the "pool" on which the lessor's capital allowances are calculated; or, if he has no allowances, there will be a balancing charge on him. That is clearly right. The fact that the disposal value comes into the lessor's capital allowances computation is no more than the counterpart of the fact that it does not come into the lessee's.

By itself, Amendment No. 54 would have been inadequate if the lessor came within Clause 43(1); that is, if his letting does not constitute a trade for tax purposes. The lessor of a building on a repairing lease is likely to come within Clause 43(1). His income from the letting falls under Schedule A, not under Case I of Schedule D. As subsection (1) of Clause 43 was drafted, or as it is drafted now, the trade which, under the subsection, is deemed to exist for the purpose of capital allowances to the lessor was brought to an end on determination of the lease; whereas it is after that point of time that, in the circumstances which I have just mentioned, it may be right to bring disposal value into account against him. The two amendments to Clause 43(1) permit this by prolonging the duration of the deemed trade from the time of the first letting of an asset


by the lessor to the time when it permanently ceases to be let by him.

I apologise for the length of that explanation, but it seemed right, as we were somewhat changing the situation which now exists, that I should spell it out. I hope that the House will agree to the Amendment.

Amendment agreed to.

8.15 p.m.

Mr. Higgins: I beg to move Amendment No. 52, in page 40, line 34, leave out from 'used' to end of line and insert
'for the purposes of a trade carried on by the lessee'.

Mr. Deputy Speaker (Sir Robert Grant-Ferris): I understand that this is a paving Amendment and that it will be convenient to take with it Amendments Nos. 55, 56 and 57.

Mr. Higgins: I think that would be agreeable, Mr. Deputy Speaker. We shall in due course come to the other two Amendments which we discussed a few moments ago. It will be convenient to discuss those Amendments with Amendment No. 52 to Clause 43. It is effectively a paving Amendment. It prepares the way for Amendments Nos. 55, 56 and 57, which arise on a subsequent Clause. Therefore, I think that it would be for the convenience of the House if we discussed those three Amendments at the same time.
I must again apologise to the House for a rather lengthy explanation, but it will be as well to get the position on the record.
These four Amendments essentially deal with a single point. Clause 43, which deals with the capital allowances on leased machinery or plant, reverses, as I said in Committee, in favour of the taxpayer a decision of the courts on the interpretation of the existing law. It was decided in the case of Macsaga Investment Co. v. Lupton which went to the Court of Appeal in 1967, that capital allowances could not be given on leased machinery or plant unless either the lessor or the lessee was using the asset in the carrying on of a trade.
This has the absurd result that if the owner of an office block lets it partly to a trader and partly to a Government

Department or local authority, the lessor cannot get full capital allowances on, for example, the lift system or something of that kind in the building, and the proportion of the allowances which he can get may vary as the tenancies in the building alter.
I think that the House will agree that that is not a satisfactory situation. The opening words of Clause 43(1) reverse this situation. As the Clause now stands, it goes too far. It would open the door to leasing transactions entered into simply to exploit the capital allowances system. Hon. Members on both sides of the House have expressed concern about such possible loopholes. I will give a simple example, though there are more sophisticated variants. We might have two individuals who each buy a car which they lease to each other for a purely nominal rent, each using his car for private purposes. Each claims capital allowances, under Clause 43, on the car that he owns, and, as these allowances will greatly exceed the rent he receives, each will have a tax loss available to be set against his other income.
We obviously need to remedy that position. The remedy is not to resile from the decision to give capital allowances where there is a genuine commercial transaction involving capital expenditure on plant and machinery between two parties neither of whom happens to be a trader. The root of the trouble is that, where the capital allowances exceed the rent, the resulting tax loss provides an incentive for artificial transactions.

The Amendments, which are necessarily a little complicated, ensure that where neither the lessor nor the lessee is trading, any surplus of the capital allowances over the rent received is not made available for set-off against other income. The surplus allowances can only be carried forward against the income from the letting of the asset in respect of which they have been given. This will be sufficient to meet the case of the genuine commercial letting and will avoid opening the door to exploitation.

There is one final point. Amendments Nos. 56 and 57 contain the substantive provisions. These are in Clause 45, which I mentioned, which governs the way in which allowances are given, including the set-off of surplus allowances


against other income. The set-off is provided for by Section 71(1) and Section 74(4) of the Capital Allowances Act, and Amendment No. 57 frustrates these provisions in cases in which neither the lessor nor the lessee is trading. Amendment No. 52, which merely brings the wording of Clause 43 into accordance with that used in the Amendments to Clause 45, and Amendment No. 52 are consequential.

I apologise for burdening the House with that explanation, but I felt that it should be on record.

Amendment agreed to.

Mr. Deputy Speaker: With the permission of the House, I will take Amendments Nos. 53 to 57 formally.

Amendments made: No. 53, in page 41, line 1, leave out from 'trade ' to end of line 2 and insert:
'from the time when the trade is treated as begun until the time when the lessor permanently ceases to let it otherwise than in the course of a trade, and then as permanently ceasing to be so used'.

No. 54, in page 41, line 10, leave out from ' but ' to end of line 13 and insert:
'as from the determination of the lease, section 41(5) above shall have effect as if the capital expenditure on providing the machinery or plant had been incurred by the lessor and not by the lessee'.—[Mr. Higgins.]

Clause 45

MANNER OF MAKING ALLOWANCES AND CHARGES

Amendments made:

No. 55, in page 42, line 2, at end insert:
'subject to subsection (2A) below'.

No. 56, in line 10, at end insert:
(2A) Where an allowance falling to be made for any chargeable period by virtue of section 43(1) above is in respect of expenditure on the provision of machinery or plant which for the whole or any part of that period or its basis period is not used for the purposes of a trade carried on by the lessee, that allowance or, as the case may require, a proportionate part thereof shall be available primarily against income from the letting of that machinery or plant only.

No. 57, in line 17, at end insert:
Provided that, where an allowance falling to be made for any chargeable period by virtue of section 43(1) above is in respect of expenditure on the provision of machinery or plant which for the whole or any part of that

period or its basis period is not used for the purposes of a trade carried on by the lessee, the proviso to subsection (1) of the said section 71 or, as the case may be, subsection (4) of the said section 74 shall not apply to that allowance or, as the case may require, to a proportionate part thereof.—[Mr. Higgins.]

Schedule 8

CAPITAL ALLOWANCES

Mr. Patrick Jenkin: I beg to move Amendment No. 58, in page 90, line 20, at end insert:
(1A) Where a person enters into a contract under which, on the performance thereof, he will or may become the owner of machinery or plant which has been in use for the purposes of a trade carried on by the person to whom the machinery or plant belongs, and—

(a) he and that person are connected with each other within the terms of section 533 of the Taxes Act, or
(b) the machinery or plant continues to be used for the purposes of a trade carried on by that person, or
(c) it appears with respect to the transaction, or with respect to transactions of which it is one, that the sole or main benefit which, but for this sub-paragraph, might have been expected to accrue to the parties or any of them was the obtaining of an allowance under Chapter I of Part III of this Act,
a first-year allowance shall not be made in respect of any expenditure incurred by him under the contract so far as relating to that machinery or plant, or if made shall be withdrawn, and there shall be disregarded for the purposes of section 41 of this Act so much (if any) of the expenditure as exceeds the disposal value to be brought into account under that section by reason of the contract so far as so relating.
I think that it would be convenient if, with this Amendment, we were to discuss Amendments Nos. 59, 60, 62 and 63, as these are all related Amendments.
The purpose of the change that we are making to the capital allowances is to simplify the system, and the 25 per cent. writing-down pool enables us to dispose almost entirely with the old system of balancing allowances and balancing charges. Paragraph 3 of the Schedule prevents advantage being taken of this system by associated traders dealing with items of plant and machinery between themselves so as to secure a tax advantage.

Amendments Nos. 58 and 59 extend this anti-avoidance provision to cover disposals by way of hire-purchase and assignments of hire-purchase contracts.


This is necessary to make sure that the legislation is not abused by two firms that are associated with each other seeking to take advantage of it.

The other Amendments are purely consequential upon the substantive Amendments, Nos. 58 and 59, and I commend the group to the House.

Amendment agreed to.

Amendments made: No. 59, in page 90, line 27, at end insert:
(b) the machinery or plant continues to be used for the purposes of a trade carried on by him, or.

No. 60, in line 42, leave out 'subparagraphs (1) and (2) above' and insert:
'the preceding provisions of this paragraph '.—[Mr. Patrick Jenkin.]

Mr. Patrick Jenkin: I beg to move Amendment No. 61, in page 90, line 43, at end insert:

Further effects of disposal etc. before bringing into use
(1) Subject to sub-paragraph (2) below, the following provisions shall have effect where a person has incurred capital expenditure on the provision of machinery or plant for the purposes of a trade and, by reason of any event, the machinery or plant ceases to belong to him without having been brought into use for those purposes—

(a) if that expenditure exceeds the disposal value which by reason of the event that person would be required to bring into account under section 41 of this Act if he had previously brought the machinery or plant into use for the purposes of the trade, the amount of the excess shall, for the purposes of that section, be added to his qualifying expenditure for the chargeable period related to the event;
(b) if the event is one such that, if that person had previously brought the machinery or plant into use for the purposes of the trade, any of the provisions of paragraph 3 above would have applied to the allowances to be made under Chapter I of Part III of this Act to another person, there shall be disregarded for the purposes of that Chapter so much (if any) of the expenditure incurred by that other person in acquiring the machinery or plant as exceeds the expenditure incurred by the first-mentioned person in providing it.

(2) Where the event referred to in subparagraph (1) above is the assignment of the benefit of a contract—

(a) paragraph (a) of that sub-paragraph shall have effect as if the expenditure there referred to were the total capital expenditure which the person in question would have incurred in respect of the machinery or plant if he had wholly performed the contract, and

(b) paragraph (b) of that sub-paragraph shall have effect as if, for the reference to the expenditure incurred by the other person in acquiring the machinery or plant, there were substituted a reference to the consideration given by that other person for the assignment.
(3) All such assessments and adjustments of assessments shall be made as may be necessary to give effect to the preceding provisions of this paragraph.

On 15th June, in Standing Committee, the hon. Member for Heywood and Roy-ton (Mr. Barnett) raised the point that, under the present tax law, if a trader sells a machine which he has bought for use in his trade before having actually used it, he can get a balancing allowance for any loss that he suffers. Under the new code, the sale of one particular machine will not throw up a balancing allowance, and, as the Bill stands, the difference between the cost of the machine and what he gets for it on disposing of it, cannot be brought into account in the pool for writing-down allowances, since those allowances apply only for expenditure on assets that have been brought into use. Therefore, the loss he makes will be unrequited, and he will get no capital allowance for it. My hon. Friend the Chief Secretary recognised that that could well be inequitable, and he undertook to consider the point.

We have considered it, and we have tabled the Amendment to provide a remedy. It allows the difference between the cost and the disposal value to be added to the qualifying expenditure in the pool on which the writing-down allowance for the year of the disposal, and subsequent years, will be calculated. In other words, the loss on the unused asset is written off along with the expenditure on the plant and machinery which has been brought into use. Perhaps I could add, in commending the Amendment to the House, that this matter was raised with us by the accountancy bodies also, and I understand that they are well pleased with the action that we have taken to deal with the point.

Mr. Barnett: It would be discourteous were I not to thank the hon. Gentleman for one of the few concessions that he has made to the number of speeches that I made in Committee. I am grateful to the hon. Gentleman for accepting and recognising the point that I made.

Amendment agreed to.

Mr. Patrick Jenkin: I beg to move Amendment No. 83, in page 91, line 43, leave out from "as" to end of line 46 and insert:
may be just and reasonable having regard to all the relevant circumstances of the case and, in particular, to the extent to which the machinery or plant was used in that chargeable period or its basis period otherwise than".
This is a somewhat technical Amendment, and I think that perhaps it is not really necessary for me to attempt to explain it to the House at length.
All I need say is that paragraphs 4 and 5 of the Schedule deal with the case in which an item of plant or machinery—and often it is a motor car—is used partly for trade, and partly for other purposes. It also covers related cases where the user receives payment—perhaps from an employer—which covers only part of the cost, that is to say a mileage allowance which is not adequate to cover an appropriate share of the depreciation. Clearly the extent to which, in those circumstances, the employee can write down the car for tax purposes will be complex.
What we originally sought to do in the Bill was to reproduce the existing law, but we are satisfied that the provision as drafted does not achieve that result. We have, therefore, put down the Amendment to give the Revenue power to make the necessary adjustments effectively to reflect the existing law on this slightly complex matter.

Amendment agreed to.

Amendments made: No. 62, in page 96, tine 26, leave out 'sale or assignment' and insert 'transaction'.

No. 63, in line 33 leave out from 'incurred' to 'capital' in line 37 and insert:
'on the provision of the motor car by the person disposing of it, and

(b) the person acquiring the motor car shall be treated for the purposes of Chapter I of Part III of this Act as having incurred on its provision'.—[Mr. Patrick Jenkin.]

Mr. Patrick Jenkin: I beg to move Amendment No. 64, in page 97, line 28 at end insert:

Effect of successions to trades between connected persons
Where a person (the 'successor') succeeds to a trade which was until that time carried on by another person (the 'predecessor') and

the two persons are connected with each other within the terms of section 533 of the Taxes Act, those persons may by notice in writing to the inspector elect that the provisions of this paragraph shall have effect; and in that event—

(a) for the purpose of making allowances andd charges under Chapter I of Part III of this Act, the trade shall not be treated as discontinued;
(b) allowances and charges shall be so made to or on the successor as if everything done to or by the predecessor had been done to or by the successor, but with no account being taken of the sale or transfer from the predecessor to the successor of any machinery or plant which was in use for the purposes of the trade at the time of the succession.

The Amendment is intended to cover the sort of situation which arises when plant or machinery is transferred from one company to another within a group when, on a reorganisation, the latter takes over the former's trade. The existing law has two provisions to deal with this situation, which I do not need to outline to the House, but what one aims to do is to make sure that in those circumstances the capital allowances, as it were, run through from the old company to the new so that no complicated transfer needs to take place on that reorganisation. The Amendment is intended to facilitate that and further to simplify the system that we have introduced in the Bill.

Mr. Dalyell: There is a general issue which I think is relevant, and perhaps this is the appropriate place at which to raise it.
There is a problem—or there has been in certain development areas—of what one might call soiled machinery. A grant goes to firm A for a building or machinery. For some reason firm A decides to close down, and the machinery or the building is handed over to firm B. Perhaps that happens after only three or four months, but during that period there is sufficient time to create an interregnum whereby firm B, the successor, does not get the advantages that had accrued to firm A, and would have continued to accrue to it had it continued in business.
Perhaps I should have given the Treasury warning of this. I have a particular case that is more than five years old, but it is the sort of thing that could happen again. I think that this is the right place at which to raise the issue, but I leave it there, and perhaps the Treasury could correspond with me about it.

Mr. Patrick Jenkin: With the leave of the House. I would ask the hon. Member to bring the particular details to my attention. One of the advantages of the new system is that, when items of plant are taken out of the pool—for instance, when a particular activity of the firm ceases, but the firm continues so the pool continues—there is no balancing charge or allowance on the old firm; the amount of the disposal proceeds is then taken out of the pool.
This may simplify the transaction in the sort of situation which the hon. Gentleman has in mind, but if the whole firm closes down and sells its assets or transfers them to another firm in the group, balancing allowances and charges may well operate, because the pool itself may come to an end. I should like to consider this situation in the light of the new simplified system.

Amendment agreed to.

8.30 p.m.

Mr. Patrick Jenkin: I beg to move Amendment No. 84, in page 99, line 35 at end insert:
( ) Section 177 of the Taxes Act shall be amended by adding the following subsection after subsection (3)—

'(3A) Where a company incurs a loss in a trade in an accounting period for which one or more first-year allowances fall to be made to it under Chapter I of Part III of the Finance Act 1971 in respect of expenditure on the provision for the purposes of the trade of machinery or plant within section 39(2)(b) of that Act, subsections (2) and (3) above shall have effect in relation to so much of the loss as would not have been incurred if the allowance or allowances had been totally disclaimed as if the time specified in the said subsection (3) were a period of three years ending immediately before the accounting period in which the DSS is incurred'
This is a much more significant and important Amendment than those which we have been considering. It is far more than a matter of mere detail. What we are doing is adding a significant improvement of the 100 per cent. first-year write-off allowance in development areas.
Last October, the Government decided to provide a system of investment incentives for plant and machinery based on accelerated depreciation. One of the criticisms which has been advanced inside and outside the House against that is that it narrows the differential in favour of investment in the development areas.

Much of this criticism has been misplaced, because it would be wrong to consider any particular measure in isolation. The whole package of my right hon. Friend's measures should be considered together, and on that, as has been said in many of our debates, the differential has been maintained.
However, the criticism had validity in one respect. Where a tax allowance depends for its value on there being an adequate flow of profits against which the allowance can be set, clearly, if there is a period when the profits are inadequate, the allowance does not achieve its full purpose and its present value is reduced. We accept that the criticism has some justification and the Amendment is intended to go a long way to meet the criticism.
It is possible, when making a claim for a 100 per cent. first-year allowance, to set it against the profits of either the current year or future years—if it has not been possible to write it off wholly against the first year—or alternatively one can go back for one year. It has been represented to us that there may be periods—certainly the current period and the months past have been one such—when the flow of profits to businesses has not been at the level that the managers or indeed the Government would have hoped and when there was an inadequate availability of profits to enable firms to take all advantage of this allowance.
Because the present worth of the allowance would be significantly diminished if it had to be carried forward to be set against profits in future years, and because merely to set it against the profits of one year would not be adequate, the Amendment provides that the allowance can be carried back for a further two years before the year in which the expenditure was incurred.
In other words, there can, for this particular form of investment—the 100 per cent. first-year allowance in development areas—be a carry back for two years to make sure that the allowance can be effectively given in the year in which the expenditure is incurred.
This may mean that accounts will have to be reopened and tax repayments will have to be made, but it is an effective method of making sure that as much of the full value of this write-off can


be given in the year in which the expenditure is incurred, despite the shortage of profits in that year.
This will reduce the necessity for firms to lose part of the benefit of the 100 per cent. allowance by having to carry forward to a future year the unexpended balance of the allowance. So the Amendment creates a special rule in favour of the free depreciation allowance for plant and machinery in development areas in that it can be carried back, unlike any other cost, against the profits for two further years.

The Amendment will give a valuable boost to those firms which are prepared to invest in the development areas and it can be accounted a significant addition to the package of the Government's measures intended to improve investment in the development areas.

Mr. Nott: I welcome the Amendment and the principle enshrined in it. Am I right in interpreting it to mean that if a company made a profit in the years prior to the publication of the Bill, any capital expenditure which it now incurs will be eligible to be offset against those profits previously made?

Mr. Patrick Jenkin: Mr. Patrick Jenkin indicated assent.

Mr. Nott: This is a welcome change, but if the Government are prepared to go this far, why could they not be more sympathetic towards the more major problem of mining expenditure? I raised this matter the other night and hon. Gentlemen oposite will recall a brief meeting that took place in the Lobby on this issue.
The complaint in respect of mining expenditure has always been that under the old cash grant system a company was eligible for grant if it indulged in development expenditure on a new mine knowing that there would be no profits for a considerable time, and in some cases, in the development of a new shaft, no profits at all. In those cases the cash grant was available, whereas under the new tax allowance system, no allowance will be available because there will be no profits on the development of an unsuccessful shaft or mine.
If the Government are prepared to make this important concession and tamper with the principle and say "Profits

made in years prior to the publication of the Bill will be eligible to offset against allowances," why are they not able to tamper with the principle a little further and allow mining in the development areas a similar concession?
Will it be possible in next year's Finance Bill to devise a system by which mining in the development areas—which has come off worse than any other activity as a result of the change from cash grants to tax allowances—is given a similar concession in view of the departure made here against the basic principle of Government legislation? In other words, will something be done next year to help this important industry in the development areas? In the debate the other night I referred to the potash side of the mining industry. I spoke of the development areas and Cornwall. I will not repeat those arguments now.

Mr. Dick Taverne: Like the hon. Member for St. Ives (Mr. Nott) we welcome the Amendment. It represents an improvement, but as he said, it is nothing like as good as grants would have been for mining. The Government will increasingly come to realise that what they have offered is not good enough and that, in the end, only a grants system can help to solve the problem to which the hon. Member for St. Ives referred.

Mr. Patrick Jenkin: I welcome the approval given to the Amendment by my hon. Friend the Member for St. Ives (Mr. Nott). I will not be drawn into the question of mining, except to say that plant and machinery used for mining in development areas will benefit from this proposal. The House has been informed that the Government have the problems of the mining industry under active review, but it would be wrong for me to anticipate the results of that review.

The Amendment is designed materially to improve and enhance the differential that exists between the development areas and the rest of the country. I am glad that the hon. and learned Gentleman the Member for Lincoln (Mr. Taverne) welcomed it on behalf of the Opposition, and I know that it will be welcome to all hon. Members on both sides who represent constituencies in development areas.

Amendment agreed to.

Clause 56

ABOLITION OF CHARGE TO CAPITAL GAINS TAX ON DEATH, ETC.

Mr. Patrick Jenkin: I beg to move Amendment No. 75, in page 48, line 22, after 'occurring', insert 'or interest terminating'.

Mr. Deputy Speaker: With this Amendment it will be for the convenience of the Committee to take the following Amendments:

No. 76, in page 48, line 27, after 'individual', insert:
and on the termination of certain interests'.

No. 65, in page 48, line 22, leave out 'death' and insert 'disposal'.

No. 66, in line 27, after 'individual', insert 'or on settled property'.

Mr. Jenkin: The fact that Amendments Nos. 65 and 66 have been selected for discussion with this Amendment, Mr. Deputy Speaker, enables me to start by paying a very sincere tribute to my hon. Friend the Member for St. Ives (Mr. Nott), who put down those two Amendments, which deal, though in a slightly different way, with exactly the same point that we are attempting—I hope successfully—to deal with in our Amendments Nos. 75 and 76.
We are dealing here with the abolition of the capital gains tax on deemed disposals, because as I have explained to the House, and to the Committee, we consider it inequitable that where assets are already charged to estate duty, often at very high rates, they should equally be charged concurrently to capital gains tax as well. The point was made that this should cover any question of a deemed disposal where a concurrent estate duty attaches. It should therefore cover assets which are given before death but which, because of the seven-year rule, come in to charge to estate duty and equally—and this is the point of the Amendments—it should cover the case where a life interest is terminated less than seven years before the death of the life tenant. This is an occasion when estate duty is charged on the assets of a trust to the extent of the life interest. We accept that it is wrong that the capital gains tax charge should apply concurrently.
This was really always intended to take effect, but the Bill was defective as drawn. It did not give a proper effective starting date for the termination of the life tenancy and its exemption from capital gains tax. It is necessary to ensure that the provisions of the Schedule are well founded for terminations other than on death, as in the circumstances I have described, and our Amendments are apt to cover the case. I commend them to the House.

Mr. Nott: I naturally welcome the Government Amendments. The Financial Secretary's kind tribute to me is no greater than that which I pay to him in accepting the point. It is much easier for a back bencher to put down Amendments than it is for Government to accept them. I am not sure that this should necessarily be the case, but it is so historically, and I am glad to see that in this instance there has been some shift from that position.
The point is technical, but quite worth while. If the owner of a family business dies and the wife, say, is life tenant of the business, the Finance Bill as previously drafted would have prevented her from disposing of the shares in the company to, say, her sons who might be managing it. That clearly could not have been advantageous to the proper management of that business.
I am delighted that my hon. Friend has taken the point. The Amendments are a major improvement, and I thank him for accepting the principle.

Amendment agreed to.

Amendment made: No. 76, in page 48, line 27, after 'individual', insert:
'and on the termination of certain interests'.—[Mr. Patrick Jenkin.]

Schedule 12

ABOLITION OF CHARGE ON DEATH

8.45 p.m.

Mr. Patrick Jenkin: I beg to move Amendment No. 77, in page 110, line 47, leave out 'sub-paragraph (iii) or (iv) of'.
I think it would be convenient to discuss at the same time Government Amendment No. 78.
These Amendments provide that where a life tenant of a trust has released his


interest and dies within seven years, so that estate duty is chargeable by reference to the value of the trust property at the date of his death, any unrealised capital appreciation on the trust assets at the date of his death is excluded from the charge to capital gains tax on a subsequent disposal by the trustees. This is closely related to the Amendments we have discussed.

Amendment agreed to.

Amendment made: No. 78, in page 111, line 1, after 'property' insert:
'in a case where neither subsection (3) nor subsection (4) above applies'.—[Mr. Patrick Jenkin.]

Mr. Patrick Jenkin: I beg to move Amendment No. 79, in page 111, line 14, at end insert:

Gifts

13A.—(1) After section 25 of the Finance Act 1965 there shall be inserted the following section:—

'25A.—(1) Where, on the death of a person, estate duty falls to be charged, by virtue of section 2(1)(c) of the Finance Act 1894, on an asset comprised in a gift inter vivos, and at the time of the death the asset—

(a) is owned by the donee; or
(b) is property settled by the gift or property which for the purposes of section 38 of the Finance Act 1957 or section I of the Finance Act (Northern Ireland) 1957 is by virtue of subsection (9) thereof treated as property settled by the gift,
then, subject to subsection (2) below, the asset shall for the purposes of this Part of this Act be deemed to be disposed of and immediately re-acquired at that time by the donee or trustee for a consideration equal to its market value; but no chargeable gain shall accrue on the disposal.

(2) Where the value on which estate duty is so chargeable is reduced under section 35 of the Finance Act 1968 or section I of the Finance Act (Northern Ireland) 1968 the appropriate portion only of the asset shall be deemed to be so disposed of and reacquired and the consideration shall be deemed to be equal to the appropriate portion of the market value of the asset.

For the purposes of this subsection the appropriate portion is the value on which estate duty is chargeable divided by the market value of the asset at the time of the death'.

(2) Section 42(3) of the Finance Act 1966 shall cease to have effect.

I think that it would be convenient to discuss at the same time Government Amendment No. 80.

These Amendments provide that where a gift is chargeable to estate duty because the donor has died within seven years of

making it, any gain which has accrued up to the date of death is excluded from capital gains tax. This removes what would otherwise have been an anomaly between the treatment of gifts and that of assets owned by the deceased at his death.

Amendment agreed to.

Mr. Patrick Jenkin: I beg to move Amendment No. 82, in page 111, line 25, at end insert:
(2) Where the principal value has been reduced under section 35 of the Finance Act 1968 or section 1 of the Finance Act (Northern Ireland) 1968 the reference in subsection (1) above to the principal value as ascertained for the purposes of estate duty is a reference to that value as so ascertained before the reduction.
This Amendment is consequential on the Amendments we have just dealt with and deals with gifts inter vivos. It ensures that the value of an asset for estate duty, which is to be binding as the market value of the asset for capital gains tax, is the value before the estate duty paper provisions are applied.

Amendment agreed to.

Amendment made: No. 80, in page 111, line 40, after '12', insert '13A'—[Mr. Patrick Jenkin.]

Clause 65

CITATION, INTERPRETATION, CONSTRUCTION, EXTENT AND REPEALS

Mr. Higgins: I beg to move Amendment No. 69, in page 54, line 24, after '5' insert '6, 7'.

This Amendment is consequential upon the acceptance in Committee of new Clauses, now in the Bill as Clauses 6 and 7, dealing respectively with relief from pool betting duty—[Interruption.] I understood, Mr. Deputy Speaker, that we were now on Amendment No. 69.

Mr. Deputy Speaker: I am sorry to interrupt the hon. Gentleman. There was some question about whether I should have called the hon. Member for Bristol, West (Mr. Robert Cooke), but I understand that he does not wish to move his Amendment No. 114, in page 49, line 36, at end insert:

(d) chattels not exempted from estate duty under the provisions of section 40 of the Finance Act 1930, if the condition stated in subsection (3) below is satisfied.

Mr. Robert Cooke: I do not intend to move my Amendment No. 114, nor No. 115, in page 49, line 37, after 'subsection (2)(b)', insert 'and in subsection (2)(d)', nor No. 116, in page 49, line 40, after 'securities', insert 'or chattels', nor No. 117, in page 49, line 41, after 'securities', insert 'or chattels'.

Mr. Higgins: As I was saying, Amendment No. 69 is consequential upon the acceptance in Committee of new Clauses, now in the Bill as Clauses 6 and 7, dealing, respectively, with relief from pool betting duty for payments to a charitable or sporting body which are a condition of entry in a pool betting competition and, secondly, continuation of the gaming licence duty in Scotland by reference to rateable values at pre-1971 revaluation levels.

The Amendment arises from the need to have these provisions within the management and enforcement responsibilities of the Commissioners of Customs and Excise, as generally set forth in the Customs and Excise Act, 1952.

Amendment agreed to.

Schedule 14

ENACTMENTS REPEALED

Mr. Higgins: I beg to move Amendment No. 129, in page 119, column 3, leave out line 35 and insert:
'"and section 166(1)" to "1970" and the word "together".'

This Amendment corrects an error in the repeals consequential on the abolition of the short-term gains tax (Case VII). As the law stands, an individual's gift of a chargeable asset with a value not exceeding £100 is ignored for capital gains tax and Case VII; but the £100 is an aggregate limit for all the gifts made by the individual in the year.

In view of the abolition of Case VII, the reference to that tax in the relevant provision needs to be repealed; but the Bill as it stands goes further than this and repeals the words which ensure that for capital gains tax the £100 limit applies to the aggregate gifts in the year. The result would be then an individual could make an unlimited number of tax-free gifts of £100 each—that is to say, he

could give away a large holding in small parcels. The Amendment corrects this.

Amendment agreed to.

Amendment made: No. 81, in page 122, line 19, column 3, at beginning insert 'Section 42(3)'.—[Mr. Higgins.]

Mr. Higgins: I beg to move Amendment No. 70, in page 126, line 11, at end insert:


1965 c. 25.
The Finance Act 1965.
In section 33, in subsection (1) the words 'one and the same one, of;"; and subsection (4).


I think that it will be convenient to take this Amendment together with Amendment No. 72.
These are consequential Amendments on the inclusion in Committee of a new Clause to relax certain of the conditions in the capital gains tax "roll-over" relief for the replacement of business assets. The relaxations are affected by repealing certain words in the existing provision, and the Amendments add these repeals to the Repeals Schedule of the Bill. The Clause itself appears in the Bill, as amended in Committee, as Clause 23.

Amendment agreed to.

Amendments made: No. 108, in page 126, column 3, leave out lines 32 and 33.

No. 71, in page 126, column 3, line 35, at end insert:
'In section 498(4) the words "to the Commonwealth territories and",
In section 500(1) the definition of "Commonwealth territory".
In section 507, subsections (2) and (3).

'No. 72, in page 126, line 44, at end insert:
2. The repeals in section 33 of the Finance Act 1965 have effect with respect to acquisitions on or after 20th April 1971.—[Mr. Higgins.]

8.54 p.m.

Mr. Maurice Macmillan: Before we come on to Third Reading, Mr. Deputy Speaker, may I move the following verbal Amendments?

Mr. Deputy Speaker (Sir Robert Grant-Ferris): Mr. Deputy Speaker (Sir Robert Grant-Ferris) indicated assent.

New Clause 29

DISABLED PASSENGERS

Mr. Macmillan: I beg to move, in line 5, leave out '1962' and insert '1971'.

These Amendments merely correct verbal errors in new Clause 29 which the Government accepted last night. The Vehicle Excise Acts were consolidated earlier this year and the reference in the Clause is to the pre-consolidation legislation. The correct title of the "Minister of Health and Social Security" is "Secretary of State for Social Services".

Mr. Taverne: The Chief Secretary gives me the opportunity to put a correction on the record. In the course of his generous concession yesterday, the Chancellor of the Exchequer said that my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) had previously voted against the proposal which he was now supporting. He realised later that that was not so and he personally apologised, very generously, to my hon. Friend. I should like to make it clear that the reference in column 1166 of the OFFICIAL REPORT for yesterday's debate to the hon. Member for Wythenshawe voting against the new Clause in a previous year is incorrect, because my hon. Friend did not vote against it.

Mr. Macmillan: I should like to thank the hon. and learned Gentleman. As he knows, there was an error. There was no reflection on the hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) and I am happy to say that the record is now clear.

Amendment agreed to.

Further Amendments made: Clause (Disabled Passengers), line 9, leave out from 'by' to 'the' in line 10.

Clause (Disabled Passengers), line 19, leave out '16(3) of that Act' and insert: '23 of the Vehicles (Excise) Act 1971'.—[Mr. Maurice Macmillan.]

Order for Third Reading read.

8.58 p.m.

Mr. Maurice Macmillan: I beg to move, That the Bill be now read the Third time.
What with Second Reading, Committee of the whole House, Standing Committee "H" and now three days on Report, the

measures in the Bill have been fairly extensively debated. Some have been debated more than others. We have had some extremely interesting contributions from both sides of the House and both sides of the Committee, sometimes directly referring to the Bill and sometimes dealing with the underlying economics or philosophy which hon. Members in different parts of the House detected behind my right hon. Friend's Budget measures either with approval or disapproval.
Sometimes we have had extremely interesting contributions from hon. Members with original and individual ideas of reform and new measures which they wished the Government to take up. Sometimes we have had repetitions of new ideas which have come before successive Committees on Finance Bills and which have been urged on successive Governments of both parties.

Mr. Barnett: And resisted !

Mr. Macmillan: And resisted by successive Treasury Ministers, as the hon. Member correctly observed.
We have had fascinating dissertations from my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams), in a highly characteristic contribution to our debates, which have been taken up with almost equal expertise by hon. Members opposite. Some hon. Members, less well versed in the detail of this type of argument, have found themselves from time to time a little confused.
We have covered all the relevant passages and points, and some were more relevant than others, if I may put it like that, and, without undue lateness, we have been fairly thorough. I am bound to admit that when debates were protracted, the blame for such protraction, if that is the right word in this context, could be fairly evenly divided between both sides. [HON. MEMBERS: "NO."] That may be a matter of judgment and opinion, sometimes subjective, depending on the length of time for which hon. Members have been sitting on the bench.
1 would like to thank hon. Gentlemen opposite and the usual channels for the amicable arrangement on the whole which we have somehow sustained in planning our programme in Committee upstairs and in the House and on Report. I have not counted either the number of Amendments discussed or the column inches in


HANSARD, but my impression is that my hon. and right hon. Friends have been more assiduous than usual in this Finance Bill. I am not sure that they have not been more assiduous in moving the Amendments and speaking to them than hon. and right hon. Gentlemen opposite.
This Bill, as usual, does two things. It implements the Chancellor's Budget judgment and makes changes in the tax system. It is unique in one way, in that the changes which are made in the tax system and structure, the reforms which this Bill is bringing in, are projected further into the future than is usual in Finance Bills. We have the value-added tax in the autumn and a change in corporation tax, which is being discussed by a Select Committee. That is not unique but it is something which has not been used for some time. There are also changes in the personal tax system, starting with this Bill and working through to unification in 1973–74.
The Chancellor has initiated and carried through a massive programme of tax reform and I am glad to say that in the process of putting this to the House and to the country we have been able to use some slight innovations and improvements in communication through the use of the Green Papers on value-added tax and corporation tax and the use of the Select Committee to discuss the details of the latter.
I do not now want to go further into the question of the Chancellor's Budget judgment and the economic situation which we debated at some considerable length recently—a debate which went on in a slightly spasmodic fashion yesterday at Question Time. I would remind the House that this Bill introduces tax reductions totalling in a full year some £1,000 million and that in itself is a considerable change for the better compared with the pattern of the last six years.
There is a time lag for these measures to have their full effect on the economy but in both the long and the short term they will lead to a more vigorous and efficient economy, as my right hon. Friend pointed out on 28th June when he gave some of the signs of the improvement he had detected. It has been said, and no doubt will be said again later this evening, that this is a rich man's Budget. It is not. The tax system as it is after

this Budget, and as it will be when the reforms are complete, will still be progressive. That is one of the reasons which enable hon. and right hon. Gentlemen opposite to say that it benefits those who are better off more than those who are less well off. Any reduction in direct taxation in a system as progressive as ours is bound to benefit those who pay the most tax but it still leaves them paying a very large proportion of tax with a relatively high tax burden.
Part of the package in this Budget was the new and considerable help given to the poorer families, the upgrading of social security benefits and the upgrading of pensions in the autumn. Part of it was the improved child allowances, helping a very large number of families, and the cut in selective employment tax which was demanded by my hon. Friends, by the country and by industry and commerce, who all sought to have it abolished. This year my right hon. Friend has been able to reduce it by half. Other elements in the Budget package were the proposals to help companies with their liquidity and profitability through corporation tax which even right hon. and hon. Members opposite felt were necessary.
In the Budget debate, my hon. Friend the Financial Secretary pointed out that the 15 per cent. earned income relief above £4,005 a year earned income cost the Exchequer in taxation only £16 million—less than 3 per cent. of the total tax reliefs.
Finally, in the package we have had the reforms of indirect taxation and the replacement of two taxes—purchase tax and selective employment tax—by one tax. On the other side, the reform of direct taxation—the one point on which the Committee and the House were in total agreement was that the unification of taxation makes it harder for people to assume that their tax burden is more oppressive than it really is. We have today discussed this aspect at some length and I need not go into it any further. Despite criticisms about not informing the House sufficiently of future intentions, I point out that my right hon. Friend has exposed more of his future tax intentions than any Chancellor of the Exchequer has done before.
The tone of our discussion, particularly in Committee and on Report, has shown that the objections of right hon. and hon.


Members opposite are sometimes more theoretical than practical and they have not been expressed with quite the vigour of the past. A lot of their criticism, even today, has reminded me of the title of a song which I remember from my younger days—" It ain't what you do, it's the way that you do it "—that's what really counts. The Opposition have criticised my right hon. Friend the Chancellor and the Government for doing the right thing in the wrong way. I reply by quoting another song title—"It ain't necessarily so". I sometimes thought that right hon. and hon. Members opposite were straining a little disagreement to go a very long way. I should be delighted to express my words in song were it not for the fact that even in church I am inclined to put the choir off by singing out of tune.
We have had disagreements between the Government and their supporters and right hon. and hon. Members opposite and a certain amount of divergence of view between the Treasury Bench and my right hon. and hon. Friends. But I can, with more than conventional sincerity, thank hon., right hon. and right hon. and learned Gentlemen opposite for the cooperative nature of their opposition and criticism and, perhaps, thank my hon. Friends for the critical nature of their cooperation. As a result, we are now embarking on the Third Reading of a much improved Bill. It is the first of a series. It is bringing in a coherent and sensible pattern of tax changes and reform, a pattern of reform which was put before the country at the last election and approved by the electorate.

9.10 p.m.

Mr. Taverne: I do not propose to follow the Chief Secretary in his historical survey of the progress of the Bill through its various stages, except to say that it was on the whole an agreeable occasion, although some of the sittings were much too late. Nor do I intend to follow him in his game of song-titles.
The reasons why we have asked for a Third Reading are twofold; first, because a Third Reading provides a chance to look back on the Budget, to see it whole and to see it in perspective; secondly, because it gives us on this side of the House a chance to register our opposition to the whole of the Bill as one which is

economically irrelevant and socially unjust.
The Budget had one good result. When it was introduced it was a personal success for the Chancellor of the Exchequer, and it certainly is no good for the country if the Chancellor does not command respect. The Budget raised the respect in which he was held, although it has perhaps again become a little worn since. The immediate effect of the Budget on the House was undoubtedly one of euphoria for the Government back benchers; the promises which they cared most about seemed to have been realised. Conservative remedies were being applied and, just as the Government are the most Conservative of post-war Governments, this Budget was the most Conservative of the post-war Budgets.
The immediate reaction in the City and in industry was to welcome the Budget, to a large extent for much the same reasons, because there is a natural sympathy between the captains of industry and commerce and hon. Gentlemen opposite. At first the popular reaction to the Budget was favourable because the people were dazzled by the size of the tax cuts. There was a momentary recovery in the Government's standing immediately after the Budget which, shortly afterwards, resumed its plunge to deeper and deeper depths.
I invite hon. Members opposite to look back at the original Budget debates. My right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) quoted "Macleod's Law" with some foresight. He quoted Macleod's statement that a Budget that looks good in April is rarely a Budget that looks good in July. This law has proved true with a vengeance, because the euphoria of the benches opposite has evaporated. Only yesterday we heard from the Government's own back benchers widening and deepening rumbles of discontent, and that I think we shall hear more and more. The effect of the Budget was being criticised from the back benches opposite and the whole of the Budget judgment was being questioned.
The mood of industry is now very different; it is a gloomy mood. If one looks at the popular reaction, the state of the opinion polls is not necessarily of enormous significance looked at over a long time span because the opinion polls go


up and down. However, unpopularity has been achieved more quickly and to a greater extent than was achieved by any of the Government's predecessors.
When one looks at the results of the local elections, who would have thought that one-and-a-half months after the Budget, which was the crowning piece of a programme which has given back £1,000 million in taxes, as the Chief Secretary has boasted, there would be such a disastrous landslide as the loss by the Tory Party of over 2,000 local government seats? Some of us predicted this. Indeed, if I may refer to my own speech in the Budget debate, I said:
So when all the smokescreen has been blown away these are the stark facts which emerge—higher unemployment, higher prices, worsening balance of payments, falling manufacturing investment."—[OFFICIAL REPORT, 5th April, 1971; Vol. 815, c. 156.]
What lessons are to be learned from the Budget? One cannot yet give a final judgment, but certain fundamental flaws in the Government's thinking have become evident.
The first of these flaws is the fallacy that tax benefits for the wealthy are a short-cut to economic health. When we were in Government the Opposition always told us that the key to economic prosperity and progress was confidence. We were told that confidence could arise only if there were a Conservative Government, and many lectures were delivered to us by the Conservative Opposition. As one moment I almost thought there was something in it. I thought that if business men believed that the measures were the right ones because they approved of them and they thought on similar lines to those who were taking the measures, this might influence their attitude to investment and might mean that the measures were made effective by the psychological reaction to them.
For a moment it looked as if the Budget might do the trick. At the end of the Budget debate the Chancellor of the Exchequer pointed with glee to the monthly survey of business opinion which appeared in the Financial Times and which seemed to suggest that this was what was happening. When I challenged the right hon. Gentleman about the forecast of investment intention, he said:
That figure represents a cautious view, but I would certainly hope … that in the out-

come we shall have a better figure for investment than that."—[OFFICIAL REPORT, 5th April, 1971; Vol. 815, c. 164.]
Since he spoke the figure has gone down and down, and every successive survey from every angle has shown a more pessimistic picture.
It is clear that this whole argument is based on a total fallacy. In the end business men are far more objective in their assessment of what is good for their investment intentions than right hon. and hon. Gentlemen opposite suppose. Business men look at what will be the demand for their products and an ideological boost is no substitute for proper economic management. That is the first of the Tory fallacies exposed.
The second lesson from the Budget, and what has happened to the economy since, is that tax reform as such is no substitute for demand management. It is true that to a large extent tax reform has been a neglected subject and, as many hon. Members will know, I have an interest in this matter in more ways than one. Some of the tax reforms proposed in the Budget, and contained in the Finance Bill, were reforms of which we approved. Furthermore, we welcomed the publication of Green Papers following the tradition launched by my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan).
Clearly, tax reform has been the subject that has absorbed the energies of the new régime at the Treasury more than any other. It is an important subject. It is not totally irrelevant to growth, but it is only one of the several factors and not necessarily the most important factor. It certainly will not help if economic management is bad.
I repeat a warning to the Government which I gave in the early hours of one morning in the Committee stage. The tax pattern for the future is a pretty unpleasant one. If one plots a full employment path for the next few years and if one looks at the pattern of public expenditure and how it is likely to develop on the basis of present plans, this will require an increase in the proportion of the gross national product that will go in taxation by the mid-1970s. I am sure that this is what the medium-term assessments will show the Treasury.
But at present we have a position of unemployment. We are therefore at a stage where the tax burden has been


reduced below the average trend which would be required if we were in a position of full employment. A number of back bench Members opposite have said from time to time that the Budget is splendid and gives a whole series of tax reforms exactly in line with good Conservative thinking, but that, unfortunately, there is one slight stain on the total picture and that is the amount of unemployment. They have said this as if somehow this were no accidental condition, as if there were an unfortunate link between the two conditions. But there is a direct link. It is precisely because the economy is slack and we face a recession that the Chancellor has had to give some boost—in the circumstances, an insufficient boost—and to lower taxation. If one looks at the requirement over the years if we return to a position of full employment, and if one looks at the added promises of further relaxations in the taxation of interest and on property income, the total burden of taxation which will have to be borne will be an increasing and a depressing one, unless the other way out is taken, that of intolerable restrictions on public expenditure.
The third lesson from the Budget is that the Budget judgment has now been shown to be totally wrong. This subject has been extensively debated and I do not wish to refer to it at any length. It is clear that the base was wrong and that the amount, in any event, was insufficient; and we now face rising unemployment. What is especially disturbing is that it appears to have been based on a persistent bias towards over-optimism in the Treasury estimates. It is true to say that until the beginning of 1969, Treasury estimates were, perhaps, persistently under-estimating the amount of consumption. It is also true that since the beginning of 1969 there has been a constant bias towards over-estimating the amount of growth and the amount of consumption which we are likely to have.
What is partciularly serious is that in the Buget the Chancellor took the wrong action on prices. We said so at the time, and there is now widespread support, again from certain hon. Members opposite, for this proposition. The Chancellor acted in a manner which provided the effects too late and in sufficiently. They were measures of the wrong kind. The Chancellor and the Treasury

Ministers were obsessed by their own propaganda on S.E.T. They whipped up a popular myth that S.E.T. had a big effect on prices. Now it is seen that the effect on prices was vastly over-stated and that a cut in S.E.T. has only a minimal effect on the cost of living. What is more, this a crucial mistake, because the total failure of the Government's policy on prices taints everything, inclding some of the most important things that the Government are trying to do.
The last lesson is that social inequality is econmically harmful. I fear that the effects of the drive towards greater inequality contained in the Budget are still to come. There are still some chickens to come home to roost.
I have not made much reference on Report to the inequality contained in the Finance Bill, since it was a constant theme of our debates in Committee. The other points that we have made from the beginning have made a considerable impact on some more discerning hon. Members opposite. For example, the whole question of the Budget judgment has gone home. On this line, we have made no impact so far. But it is clear that the Chancellor of the Exchequer cannot avoid a complete change of strategy in dealing with inflation, and that a voluntary incomes policy must be an important part of that change of strategy. It is also clear that the right hon. Gentleman cannot get within miles of that if he continues to pursue a policy which is so heavily biased towards the wealthy. That is why I say that the final lesson is that social justice is a central part of economic strategy.
This, therefore, is a Budget which is irrelevant, except in so far as it is harmful. It is totally unjust, and I shall ask my right hon. and hon. Friends to vote against the Motion.

9.27 p.m.

Mr. John Farr: I hope that I shall be forgiven if I do not pursue many of the arguments of the hon. and learned Member for Lincoln (Mr. Taverne). He seemed to revel in a cloud of gloom and despondency. He spoke almost with relish about the prospects of unemployment and seemed to sense that, whichever Government were in office, there would be a need for increased taxation in 1974. He went on to say that there was a bias, anyhow,


to over-optimism in the Treasury's estimates. Listening to the hon. and learned Gentleman the House may well conclude that, if ever the unfortunate day comes when he has a hand in the Treasury's esimates, one of his first actions will be to see to it that any misplaced bias to over-optimism is eradicated. The hon. and learned Gentleman will do that effectively, I am sure.
We on this side of the House take a different view. We believe that it is a first-class Budget. It is fair to say that when my right hon. Friend introduced his Budget a few months ago, he did so as a man standing in the shadow of a great statesman. Today, as a result of this Finance Bill, my right hon. Friend stands in no one's shadow. Throughout the country there is a feeling of warm affection for all that he has done for all sections of the community in this Finance Bill.
I want to specify three points which I find worthy of note. First, I congratulate my right hon. Friend on assessing husbands and wives separately for income tax. I know from personal experience that many wives would have gone back to their previous employments before the Budget if only they had found it worth while financially. I know, for example, of highly skilled physiotherapists, of whom the nation is in desperate need, who, being married with two or three children, would not return to their old jobs. They felt that it was unrewarding financially to go back to work since they would have to employ others to do their housework and look after their children. I congratulate my right hon. Friend warmly on what he has done in that direction.
Another relief provided in this Finance Bill which has been welcomed by my constituents is the halving of selective employment tax. We hope to see the other half go next year. I know from personal experience what a tremendous amount of wasted time and damping down on initiative this tax has occasioned. For instance, those engaged in farming have had to go through the ludicrous procedure every month of paying S.E.T., which is then held by the tax collector for three or four months before it comes back in the form of a refund. It is difficult to conceive a more ludicrous time-

wasting performance for making a forced loan to the tax collector for three or four months before it comes back again. Only a Socialist Chancellor of the Exchequer in his heyday could have conceived such a nonsensical arrangement. I am glad that at least half of the S.E.T. has now gone.
Thirdly, I should particularly like to congratulate my right hon. Friend on what he did last night. He proved that he and his colleagues on the Treasury Bench were humane enough to accept the critical and valuable new Clause, supported by hon. Members on both sides of the House, relating to disabled persons who, due to their disabilities, are unable to drive motor cars. The Chancellor showed compassion in accepting that valuable proposal which was tabled yesterday by hon. Members on both sides. I know from practical experience that this concession which we have now put into the Bill will make a substantial difference to disabled persons who, being unable to drive, have to rely, for instance, upon their wives, relatives or friends to drive for them.
If I have any concern about the Bill, it is that the Chancellor has not been energetic enough in tackling the injustice of the application of the capital gains system. My fears about the justice and fairness of the system exist for the following reasons. The Bill contains marginal reliefs, but it does not attempt to tackle the basic injustice and unfairness of the capital gains tax system. It is basically unfair because, at the present rate of inflation, a person's liability for capital gains tax can be doubled within ten years without the slightest increase in the real value of his assets. Hon. Gentlemen opposite do not appear to be particularly concerned. I am thinking of how it affects many people who have relatively small assets and who, due to the rise in the cost of living and the decrease in the value of money, are year by year drawn into the capital gains assessment network. It means that, with stable values, capital gains tax liability is increasing by 10 per cent. per annum.
Many thousands of holders of small assets have become liable to capital gains tax each year solely as a result of inflation without any increase in the real value of their assets. That is an unfair situation. I hope that the Government


will bring inflation under control. If not, then steps must be taken to correct this anomaly in the next Finance Bill.
Inflation is having a serious effect on small family businesses. It can only hasten their departure from the scene. It may be that, in the interests of national efficiency, we should get rid of some family businesses, but I should hate to see them have to leave the scene in this way.
On the whole, this is a fine Budget. After the dead hand of Socialist financial control for five or six years, with continually rising taxation, and with the usual Socialist devaluation, it is like a breath of fresh air to have a Bill containing a good measure of Conservative common sense.

9.35 p.m.

Mr. A. E. P. Duffy: The hon. Member for Harborough (Mr. Farr) claims that this is a fine Budget, but he must be blind if he cannot see the evidence on all sides that the Budget judgment is already being reconsidered by his right hon. Friend, and that a fresh stimulus to spending is on the way. The hon. Gentleman will feel foolish on the day when that is introduced.
Whatever views may be entertained about the adequacy of the stimulus, there must be growing doubts among hon. Gentlemen opposite about the timing of it. It is surely now clear that the individual measures were badly chosen by the Chancellor, simply because their impact has been slow-acting, and has been too long delayed. Only now, in this week, are we beginning to enjoy the effects of fiscal boosts.
As a result, total spending in the first half year is considered to be less than originally estimated by the Chancellor—according to the National Institute as much as £600 million less on consumer expenditure—and the disappointing behaviour of exports is playing just as large a rôle as the shortfall in consumption, and this is what I find especially disturbing. The duty of the Government, therefore, is to ensure, first, that a large part of any stimulus that may be forthcoming is directed towards the expansion of exports and, secondly, in that way to ensure that any stimulus will not stoke up inflation.
The behaviour of prices is crucial, and anything that the Chancellor can do, through the use of the regulator, to damp down prices will be widely welcomed because, as my hon. and learned Friend the Member for Lincoln (Mr. Taverne) said, the investment intentions that have been revealed since the first short-lived euphoria are now shocking. Investment follows, and not leads, and therefore there are further grounds for the use of the consumer tax regulator.
There is also a case for making exporting profitable if a safe and continuing assault is to be made on unemployment. This is my major point this evening, and in the two or three minutes that remain to me I want to mention my own City of Sheffield. I am sorry that the Chancellor could not remain, because I was going to invoke our common Yorkshire background. I was going to remind him that though we may be broadly accustomed though by no means reconciled to higher levels of unemployment in some parts of Yorkshire, especially in the heart of the coalfield, than in other parts of the country, I am sure he would agree with me that never at any time, in our worst moods, until recently, would we have imagined that a city like Sheffield could have been the scene of such rising unemployment.
The position now is that unemployment there is at its highest since 1939. It has doubled during the last year. Last week there emerged the prospect of 4,500 redundancies in the local steel industry. This week the Darnall firm of Cravens Homalloy, in my constituency, announced plans to make large-scale redundancies in the next few weeks, and 20 per cent. of the city's school leavers are expected to be on the dole before the summer is out.
As a result, a spectre is haunting Sheffield tonight, a spectre of fear, the fear of unemployment. It will also be haunting the chambers of the City Council in its proceedings tonight, because the Council is debating the position, and I imagine that it will, as a result, ask me to join it in making representations to the Government for the granting to it of intermediate area status.
The Chancellor has it within his power to relieve Sheffield of this fear. If only he will take the course of action that I have prescribed and provide some stimulus to our economy. Yet I recognise his


difficulties. I hope that he will do what we all want in Sheffield and give an impetus to exports. He could then safely use the regulator without worrying that he would also be stoking up inflation.

9.41 p.m.

Mr. Percy Grieve: I am happy and proud to welcome this Finance Bill in the very words used of it by the hon. Member for Lincoln (Mr. Taverne)—the most Conservative Finance Bill since the war. Perhaps I do not use the word in the same sense. It is Conservative in taking taxes off the backs of the people. It is Conservative in reducing taxes by £1,000 million a year. It is Conservative in initiating a great radical reform of the whole tax system such as no Government have undertaken since the war and such as we did not see in the six Socialist Budgets that I have seen since I became a Member.
Indeed, this Finance Bill is Conservative in the sense that it is undoing many of the more vicious Socialist Measures which we had to suffer through six years of Socialist Government. I will not repeat the welcome which my hon. Friend the Member for Harborough (Mr. Farr) has already given to parts of the Bill, but there are some to which I wish to refer.
The first is the abolition of capital gains tax on assets realised upon death. This was a vicious double swipe at the lifetime savings of men, who normally died before their wives, and whose wives are therefore left even poorer.
I particularly welcome Clause 13, which does away with one of the most vicious Measures of the last Government—the aggregation of children's incomes with those of their parents. At the time that this was done, we were treated by the then Chief Secretary—now Diamond cutting diamond in another place—to a wonderful new principle, that family income should be treated as one, although of course this was not applied to earned income but only to unearned income.
It seemed to revert to some form of tribalism which exists nowhere else in the world. We all knew that the true reason for that measure, which hit at children deriving incomes from legacies, was not in aid of some new principle of the unity of the family but in order to make it even more difficult for families

to pay the school bills of their children when they were educated independently.
I particularly welcome the disaggregation of the incomes of working husbands and wives. It has always seemed to me one of the most grossly unfair parts of our fiscal system that marriage should in many cases increase the tax burden of the couple. I was interested to note the other day the proposal of the Law Commission that we should now have a double form of marriage—a civil service and a religious service. I wondered whether that might not be a way of getting around this vice in our tax system, because it might be possible to be married in the eyes of God but not in the eyes of the State.
But I also thought that, whenever such a measure is introduced, if a Conservative Government have not succeeded in abolishing altogether the aggregation of the income of husbands and wives, there might be some clause providing that one could not be married in the eyes of God without going through the State ceremony first—

Mr. Loughlin: Has the hon. and learned Gentleman ever reflected that perhaps marriage is a contract between two people who do not trust each other?

Mr. Grieve: I cannot speak for the hon. Gentleman's experience of marriage. It is not my own, and I would not so describe it.
I am sorry that the Chancellor, in introducing a great and sensible measure of reform, did not feel able to go further and enable husbands and wives to opt for their incomes to be taxed separately, whether they are from earnings or investments. In leaving the investments of husbands and wives aggregated, as they are at present, there is a further element of discrimination in our tax system against investment income.
Although I appreciate that to have disaggregated such incomes altogether would have been costly, I hope that in due course, in justice and fairness—indeed, in fairness to the institution of marriage—the time will come when the Chancellor will feel able to dis-aggregate both the investment income and earned income of husbands and wives.
I will not reiterate what has been said by way of welcome to many of the other reforms in the Finance Bill, including


the halfway house to the abolition of S.E.T., a tax which penalised the service industries, industries which alone saved the revenues of this country and our foreign exchange in the last years of Socialist misgovernment.
This is a first and substantial Measure of reform. When it has been carried into law it will go a long way to putting the country on its feet economically and restoring some of the damage that six years of Socialist misgovernment have done to our economy.

9.48 p.m.

Mr. Dalyell: For about two hours in Committee upstairs and for a short while on the Floor of the House yesterday we discussed the question of L.P.G. This is an important issue, partly because it typifies the Government's attitude towards the anti-pollution campaign and partly because it brings into question the whole business of Treasury advice.
The information we have today is that devices for fitting to petrol engines are not suitable for leaded petrol which is necessary for the majority of cars. The lead, which improves the octane rating, poisons the catalyst in the device, making it ineffective. Alternative means of raising octane ratings include aromatics already suspected of contributing to carcinogenic compounds in exhaust gases. This may seem detail, but it is important that somebody puts it on the record and it is realised that the Treasury can be wrong.
The reference of the Minister of State to diesel engines meant choosing one pollutant—a blatant selection of facts by Ministers and their advisers—in the selection of carbon monoxide, where diesel performance is outstanding. Other pollutants—hydrocarbons, oxides of nitrogen and unburnt carbon; in other words, soot—are ignored. However, industry has not ignored them so readily and, given the choice of diesel or L.P.G.-powered forklift trucks for use in a confined space, the exclusive choice is L.P.G.
Further, the Minister of State referred to measures to prevent the emission of fumes from the crankcases of new cars. These fumes are unburnt hydrocarbons. Hydrocarbon emission from diesel exhaust may be 100 times greater than from the L.P.G. engine. Oxides of nitrogen may be 10 times greater. The carbon or soot which is familiar from

diesel exhaust is not measurable in the case of L.P.G. and, for example, buses in Vienna use 30 per cent. L.P.G. which is added to clean up exhaust gases.
As a back bencher, even as an Opposition back bencher, one stands not a chance against the Treasury machine unless one is prepared to be specific and detailed. We have been both specific and detailed, and the hope is not that anything will be done in 1971, but that the function of a Committee stage and the hours we have spent in the Committee will be fulfilled by a facing up to the problem next year, and a shift of policy. That is why I have ventured once again to intrude in these debates.

9.52 p.m.

Mr. David Mitchell: I listened with fascination to the hon. and learned Member for Lincoln (Mr. Taverne) leading the Opposition's case against the Third Reading of the Bill. I thought he was a little uncharitable and did less than justice to the Budget. Perhaps that is to be expected from Opposition benches in any case, and I do not quibble about it.
The hon. and learned Gentleman first talked about "Macleod's Law", and told us that a Budget that looks good in April does not look good in July. The quotation is perfectly fair, but I am not concerned about what it looks like now but about its effect, and the whole Budget is designed around a delaying effect which will not come into operation until later this year. If after 12 months the hon. and learned Gentleman can still maintain that his present Budget judgment is right I will be happy to concede the point, but I doubt whether his Budget judgment will prove any better than it was when he and his colleagues were on the Treasury Bench.
Second, the hon. and learned Gentleman referred to the confidence factor. He said, quite rightly, that business men are hard headed; that they look at the demand for their product and at their profits, and are not concerned with the ideological boost. This is true, but the effect of the Budget has not so far been seen in the business world. Business looks at its post-tax profit, and when the cuts in corporation tax come into effect and busines men see themselves getting a lower tax bill at the end of the year, we shall begin to see the Budget's effect.
I believe that it is quite right to work on the theme of making profits hard to get but well worthwhile once they have been made. As I see it, this is part of the strategy which my right hon Friend the Chancellor of the Exchequer has followed here. How easy it would have been, and how popular, to latch on to the Opposition's demand to give a general boost to the economy; to feed out money which would merely find its way into satisfying wage inflation. That may be the desire of hon. Members opposite, especially those who are chuckling at that suggestion, but the reality is that the effect on costs would be devastating.
Thirdly, the hon. and learned Member said that unemployment at its present levels is not accidental. I am glad that he recognises that it is not accidental. It is a direct result of inflationary wage settlements, many of which are being strongly supported by his colleagues on that side. From the contacts I have in industry, and the discussions I have had there, I see quite clearly two things happening at present. Because of inflationary wage settlements, industry is forced to look for economies. Some cost increases, though not all, are being passed on as price increases, but every time an increase has to be made there is first a search for economies. One of the principal economies sought for is in labour. If a firm can do without someone, that is one economy. Many industries are pricing themselves out of the market because of the high level of wage settlements they have been forced to accept. This applies particularly to assembly industries, such as shipbuilding.
So I take this part of the criticism of hon. Members opposite and throw it back in their teeth and ask them whether they will go round the trade union conferences in the autumn and tell their friends there that the quickest way to increase unemployment is to press for inflationary wage settlements. Will they nave the courage in the national interest and not just in the party interest to urge on the union conferences a degree of moderation and restraint in order to ensure that one of the major costs, which lies in their hands, is not increased in a way which will reflect itself in escalating prices in the months ahead?
The hon. and learned Gentleman referred to a bias in the Budget judgment in favour of the wealthy. I say simply that one cannot help the poor by pulling down the rich; that one cannot help the wage-earner by pulling down the wage-payer; that one cannot create full employment by kicking the employer in the teeth. [An HON. MEMBER: "Why not?"] That sort of facile remark is an indication of the lack of reality which so often pervades hon. Members opposite. One cannot encourage investment without making it worth while for the investor. When looking at the Budget judgment, these are the things which the House should have in mind. For these reasons, I thoroughly welcome the Budget and look forward to more budgets reducing taxation further in the coming years of this Government.

9.57 p.m.

Mr. Barnett: Mr. Barnett rose—

Mr. Loughlin: Mr. Loughlin rose—

Mr. Speaker: Mr. Barnett.

Mr. Loughlin: On a point of order, Mr. Speaker. I would like clarification. I understand that this debate is unrestricted in time and that even after my hon. Friend the Member for Heywood and Royton (Mr. Barnett) speaks no other hon. Member is prohibited from speaking afterwards. Can I have that Ruling?

Mr. Speaker: Subject to the rules about the Closure and so on, this is unrestricted business, but it is a convention of the House that when a Front Bench speaker gets up the Chair calls him.

Mr. Loughlin: I am sorry, but I must pursue this. I accept that once a Front Bencher stands up he is, in effect, attempting to exclude back benchers, not in the sense of time but by virtue of the very point you make when you say that it is subject to the moving of the Closure. I would like some guidance on this, because, apart from my own case now, it is important to back benchers that Front Benchers should not take to themselves the right of closure of debates. In view of the fact that I stood up after telling my hon. Friend that I was going to stand up, can I have your assurance that if the Closure is moved immediately he sits down you will refuse to accept it?

Mr. Speaker: I have considerable sympathy with the hon. Gentleman's point of view. I think these are matters which must be ironed out on his side of the House. But he will not expect the Chair to give any undertaking as to when it will or will not accept the Closure. I will certainly bear in mind the general situation of the debate and whether I think it is right to allow the Closure. But this is really one of those House of Commons situations which usually are ironed out either on one side or the other.

Mr. Barnett: I have considerable sympathy with my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin). I certainly have no wish to shut him out if he wishes to speak afterwards. He is perfectly free to exercise that right and I would not seek to prevent him.
The hon. Member for Basingstoke (Mr. David Mitchell) was a little audacious to suggest to us on this side that we should recommend trade unionists to co-operate with the Government in a prices and incomes policy in view of what the Government are doing in the Bill. When the Chief Secretary opened this debate, he gave us some song titles. He said that he would not sing them to us because he was generally out of tune. It is equally true, I suppose, that this year's Finance Bill is out of tune with realities, except the realities of the few hon. Members opposite who have spoken in the debate and have appeared to come from another world with some other kind of realities.
The Chancellor's words on Second Reading have turned sour by the time we reach Third Reading. If anyone doubts that, one has only to look at the Chancellor's words on Second Reading, when he told us that he was creating
a nation which combines … fairness and success.
It was interesting that the Chief Secretary certainly did not repeat those words tonight, because nobody in his right mind could imagine that the Bill creates either fairness or success.
The Chancellor went on to tell us that he was giving
a modest stimulus to demand, and to … stimulate investment and assist the fight against inflation.

If anybody could believe that today, it would be very surprising. Once again, the Chief Secretary did not feel able to say anything about this.
The Chancellor told us that
Business confidence should be helped".
As my hon. and learned Friend the Member for Lincoln (Mr. Taverne) pointed out, if business confidence has been helped, it is not noticeable, because the last business survey indicated clearly that business men's confidence has certainly not been stimulated, to judge by their view of what is likely to happen to industrial investment.
The Chancellor went on to tell us that
the reaction throughout the country has been one of approval".—[OFFICIAL REPORT, 28th April, 1971; Vol. 816. c. 439, 440, 441, 451.]
If anyone could believe that after the Bromsgrove by-election and the local government elections, I would be very surprised. Certainly, we never heard the Chief Secretary say anything about it when he spoke on Third Reading.
Thus, three months after the Budget, both the economic and the tax effects are disastrous, both in the short term and in the long term. Economically, it is now clear that the Chancellor's judgment was wrong in March. This in itself is no terrible thing. It would not have been terrible had the Chancellor conceded that at the time he made his Budget judgment he thought that that was the situation, but that within a few months, when the figures came out, it turned out that he was wrong, as everybody else now recognises. What is terrible is the failure of the Chancellor to admit that he was wrong when the figures are put before him, because that is what is happening today.
We see inflation raging on, with no chance of the sort of co-operation with trade unions about which the hon. Member for Basingstoke spoke. Even with the belated measures that the Government propose to introduce, unemployment will still, at best, stick around the 800,000 or 900,000 level and output is unlikely to reach even our productive potential. Above all, however, industrial investment is in decline with appalling consequences for our long-term prospects. So much for the economy under the Tories 12 months after they won the Election.
And so one comes to the Finance Bill and the new taxation philosophy of the Chancellor. On a previous occasion, I spoke about the bogus nature of the reform, the value-added tax and the corporation tax. The value-added tax is something new but it is certainly no simplification. As used by the present Government, it seems likely to be far from a progressive reform.
It is now clear that our suspicions were well founded about the one genuine reform in the Bill—the unification of income tax and surtax. It is clear that the Chancellor's intention is to use this reform as a cloak for reactionary tax changes. There is no doubt, as we found in our debates both on the Floor of the House and in Standing Committee, that the whole of this unification proposal is intended to disguise the fact that it will be utilised in a way which will fall most harshly on the lower end of the income scale, because, without a substantial increase in economic growth and with rising public expenditure, paid for unfairly under the Government's proposals, any proposed reduction in tax on investment income at the higher income scales, as the Government propose under the unification system, can be only at the expense, not just of the lower end of the tax scale, but of the majority of tax payers.
The only excuse there could have been for this Finance Bill would have been that it was worth temporarily widening the gap between the lowest and the highest ends of the income scale for some kind of longer-term incentive from this method. But it has all been done without any kind of evidence that it will have that kind of incentive effect. It is therefore not surprising that we see no sign yet of any incentive effect causing a massive upsurge in effort.
Indeed, the only upsurge in effort resulting from the Bill has been that made available to all those who have the opportunity to use the Bill to obtain bigger and bigger tax reliefs from the additional tax avoidance opportunities left for them. If the philosophy in the Bill is that of a Conservative Government and if it foreshadows more of the same in a future Finance Bill, when the Prime Minister vacates No. 10 it will be a much less united country he leaves behind. We

condemn this divisive philosophy, and I ask my hon. Friends to vote against it in the Lobby.

10.8 p.m.

Mr. Higgins: This is a reforming Finance Bill and it begins and foreshadows a transformation of the tax system which has grown complicated and oppressive. It thus redeems the Government's election pledge to reduce taxation and to simplify the tax system. The Government believes that by easing the pressures of taxation especially on families, they are making a contribution towards checking inflation; and that by simplifying the system and by getting rid of the indefensibly high marginal rates on the higher incomes, and by encouraging savings, they will encourage personal initiative, which is an essential ingredient of economic growth.
It is worth recalling that the revenue cost involved is the biggest in any Budget since the war. When the hon. and learned Member for Lincoln (Mr. Taverne) says that it is irrelevant, except in as much as it is harmful, that is a quantitative assertion worth bearing in mind, because the Budget will mean a substantial increase in the size of the market available to our producers. This is bound to encourage investment, for it will be widely agreed that the prospect of a growing market is a most important condition for a healthy level of investment.
But the question of timing is important and the major parts of the Budget with regard to the child allowances and the cuts in S.E.T. are only just beginning to take effect. Related to other measures, such as the cut in corporation tax and the cut in personal income tax announced earlier, these measures will do much to improve the economic climate.
My hon. Friend the Member for Harborough (Mr. Farr) pointed out that the cut in S.E.T. would halve the forced loan of manufacturing industry and thereby increase company liquidity at a time when that was very important. Similarly, the Bill will make a contribution to the fight against inflation because the increase in the child allowances will raise the standard of living of families and the tax liability of a married man with two children will be reduced, if he is on average industrial earnings, by 60p a week. This is in addition to the tax cut on the standard rate which has already


been made. Combined with the policy of de-escalation of inflationary wage claims which the Government are pursuing we shall have taken an important step towards curing what is undoubtedly the most pressing of our economic problems.
We have, of course, had a number of fascinating debates, whether on the disabled or on the question of pollution. To answer the specific point raised by the hon. Member for West Lothian (Mr. Dalyell), in reaching a decision on the question of the use of gas for vehicles we were looking at all the various pollutants from vehicles and it was the question of total pollution, as I stressed at the time, which we regarded as important.
The process of simplication, particularly with regard to close companies, will be important not only in reducing the burden on the revenue but also in reducing the burden of work which has to be done in a number of small firms. This will mean that they will be able to concentrate their efforts on running their businesses rather than seeking to solve complicated tax problems.
Similarly we are now engaged on a major programme of tax reform of which the unification of income and surtax is the first step. The hon. and learned Member for Lincoln says that tax reform is no substitute for demand management and that we can accept. The change to unification will mean that people can more readily understand what is their tax burden. We shall be introducing provisions for charging the first slice of investment income at the earned income rate. That will be important in encouraging savings. We have introduced further Green Papers on the value-added tax and corporation tax and are engaged in a major programme stretching over a number of years.
As to the accusation that the Bill is socially unjust I can only say that that is complete nonsense. Hon. Gentlemen opposite just will not recognise the very large range of measures which we have introduced over the last year to help those most in need. In our first year of office we have reduced the tax burden by some £1,000 million, which is in marked contrast

to the Finance Bills we had under the previous Administration. This approach is embodied in this Bill and I ask my hon. and right hon. Friends to support it.

Mr. Loughlin: Before the hon. Gentleman sits down—[HON. MEMBERS: "TOO late."]—I am not too late. There is no time limit. The hon. Gentleman talked about a reduction in income tax and this is something which we ought to examine in more detail. Using the figures given by the hon. Gentleman in the last two or three minutes it looks good. He said something about reducing the total burden of income tax by £1,000 million. He is talking about direct taxation. The Government are changing the system from direct to indirect taxation. It is easy for the Government to give tax reductions of £1,000 million to certain strata of society if at the same time they change the system of income tax levies so that more tax is paid indirectly than directly. That is what the Government are doing.
If the 10 Orders which we discussed last week—and I protested that we had only one-and-a-half hours to discuss them—as a consequence of which the housewife has to pay a greater amount of tax over the counter—[Interruption.] I know that the Chief Secretary is not interested in indirect taxation. He is not interested in the housewife or in the average person. He is solely interested in people who have made contributions to the Conservative Party and who are now getting the payoff.
The point is that this Bill tells only half the story. [An HON. MEMBER: "Tell the other half."] If the hon. Gentleman wants to intervene, I do not mind; we have all the time in the world. There is no point—[HON. MEMBERS: "Hear, hear."]—in claiming credit for a Bill which reduces the taxation burden on people who can afford to pay taxes if the Government's policy increases the taxation burden on those who cannot afford to pay taxes.

Question put:—

The House divided: Ayes 206. Noes 177.

Division No. 414.]
AYES
10.18 p.m.


Adley, Robert
Archer, Jeffery (Louth)
Awdry, Daniel


Alison, Michael (Barkston Ash)
Astor, John
Baker, Kenneth (St. Marylebone)


Allason, James (Hemel Hempstead)
Atkins, Humphrey
Balniel, Lord




Barber, Rt. Hn. Anthony
Grieve, Percy
Owen, Idris (Stockport, N.)


Batsford, Brian
Gummer, Selwyn
Page, Graham (Crosby)


Bennett, Sir Frederic (Torquay)
Hall, Miss Joan (Keighley)
Page, John (Harrow, W.)


Berry, Hn. Anthony
Hall, John (Wycombe)
Parkinson, Cecil (Enfield, W.)


Biffen, John
Hamilton, Michael (Salisbury)
Percival, Ian


Biggs-Davison, John
Hannam, John (Exeter)
Pike, Miss Mervyn


Blaker, Peter
Harrison, Col, Sir Harwood (Eye)
Pounder, Rafton


Boardman, Tom (Leicester, S. W.)
Haselhurst, Alan
Powell, Rt. Hn. J. Enoch


Body, Richard
Hastings, Stephen
Pym, Rt. Hn. Francis


Boscawen, Robert
Hayhoe, Barney
Rawlinson, Rt. Hn. Sir Peter


Bossom, Sir Clive
Hicks, Robert
Redmond, Robert


Bowden, Andrew
Higgins, Terence L.
Reed, Laurance (Bolton, E.)


Boyd-Carpenter, Rt. Hn. John
Holt, Miss Mary
Rees, Peter (Dover)


Braine, Bernard
Hordern, Peter
Renton, Rt. Hn. Sir David


Brinton, Sir Tatton
Hornsby-Smith, Rt. Hn. Dame Patricia
Ridley, Hn. Nicholas


Brocklebank-Fowler, Christopher
Howe, Hn. Sir Geoffrey (Reigate)
Ridsdale, Julian


Brown, Sir Edward (Bath)
Howell, Ralph (Norfolk, N.)
Rossi, Hugh (Hornsey)


Buchanan-Smith, Alick (Angus, N amp; M)
Hunt, John
Russell, Sir Ronald


Buck, Antony
Hutchison, Michael Clark
Sandys, Rt. Hn. D.


Bullus, Sir Eric
Irvine, Bryant Godman (Rye)
Scott-Hopkins, James


Burden, F. A.
Jenkin, Patrick (Woodford)
Sharples, Richard


Butler, Adam (Bosworth)
Jessel, Toby
Shaw, Michael (Sc'b'gh amp; Whitby)


Cary, Sir Robert
Joseph, Rt. Hn. Sir Keith
Shelton, William (Ctapham)


Channon, Paul
Kellett-Bowman, Mrs. Elaine
Sinclair, Sir George


Chapman, Sydney
Kershaw, Anthony
Skeet, T. H. H.


Chichester-Clark, R.
Kilfedder, James
Smith, Dudley (W'wick amp; L'mington)


Clarke, Kenneth (Rushcliffe)
Kimball, Marcus
Soref, Harold


Clegg, Walter
King, Evelyn (Dorset, S.)
Speed, Keith


Cockeram, Eric
King, Tom (Bridgwater)
Spence, John


Cooke, Robert
Kinsey, J. R.
Sproat, lain


Coombs, Derek
Knight, Mrs. Jill
Stainton, Keith


Cooper, A. E.
Knox, David
Stanbrook, Ivor


Cordle, John
Legge-Bourke, Sir Harry
Stewart-Smith, D. G. (Belper)


Corfield, Rt. Hn. Frederick
Longden, Gilbert
Stodart, Anthony (Edinburgh, W.)


Cormack, Patrick
Loveridge, John
Stokes, John


Costain, A. P.
Luce, R. N.
Stuttaford, Dr. Tom


Critchley, Julian
MacArthur, Ian
Sutcliffe, John


Crouch, David
McCrindle, R. A.
Taylor, Edward M. (G'gow, Cathcart)


Curran, Charles
Maclean, Sir Fitzroy
Taylor, Frank (Moss Side)


Davies, Rt. Hn. John (Knutsford)
McMaster, Stanley
Taylor, Robert (Croydon, N. W.)


d'Avigdor-Goldsmid, Sir Henry
Macmillan, Maurice (Farnham)
Tebbit, Norman


d'Avigdor-Goldsmid, Maj.-Gen. James
McNair-Wilson, Patrick (NewForest)
Temple, John M.


Deedes, Rt. Hn. W. F.
Madden, Martin
Thompson, Sir Richard (Croydon, S.)


Dodds-Parker, Douglas
Madel, David
Trafford, Dr. Anthony


Douglas-Home, Rt. Hn. Sir Alec
Maginnis, John E.
Turton, Rt. Hn. Sir Robin


Eden, Sir John
Mather, Carol
van Straubenzee. W R.


Elliot, Capt. Walter (Carshalton)
Maude, Angus
Vaughan, Dr. Gerard


Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Mawby, Ray
Vickers, Dame Joan


Eyre, Reginald
Meyer, Sir Anthony
Waddington, David


Farr, John
Mills, Stratton (Belfast, N.)
Walder, David (Clitheroe)


Fell, Anthony
Mitchell, Lt.-Col. C. (Aberdeenshire, W.)
Walker, Rt. Hn. Peter (Worcester)


Fenner, Mrs. Peggy
Mitchell, David (Basingstoke)
Walker-Smith, Rt. Hn. Sir Derek


Finsberg, Geoffrey (Hampstead)
Moate, Roger
Wall, Patrick


Fisher, Nigel (Surbiton)
Molyneaux, James
Walters, Dennis


Fletcher-Cooke, Charles
Monks, Mrs. Connie
Ward, Dame Irene


Fookes, Miss Janet
Monro, Hector
Warren, Kenneth


Fortescue, Tim
Montgomery, Fergus
Wells, John (Maidstone)


Gilmour, Ian (Norfolk, C.)
More, Jasper
Wiggin, Jerry


Gilmour, Sir John (Fife, E.)
Morgan, Geraint (Denbigh)
Wilkinson, John


Glyn, Dr. Alan
Morgan-Giles, Rear-Adm.
Wolrige-Gordon, Patrick


Goodhart, Philip
Morrison, Charles (Devizes)
Wood, Rt. Hn. Richard


Goodhew, Victor
Mudd, David
Woodhouse, Hn. Christopher


Gorst, John
Murton, Oscar
Wylie, Rt. Hn. N. R.


Gower, Raymond
Nabarro, Sir Gerald



Grant, Anthony (Harrow, C.)
Normanton, Tom
TELLERS FOR THE AYES:


Gray, Hamish
Nott, John
Mr. Paul Hawkins and


Green, Alan
Oppenheim, Mrs. Sally
Mr. Bernard Weatherill




NOES


Abse, Leo
Buchan, Norman
Cox, Thomas (Wandsworth, C.)


Albu, Austen
Buchanan, Richard (G'gow Sp'burn)
Crawshaw, Richard


Allaun, Frank (Salford, E.)
Callaghan, Rt. Hn. James
Dalyell, Tam


Allen, Scholefield
Campbell, I. (Dunbartonshire, W.)
Davidson, Arthur


Ashton, Joe
Cant, R. B.
Davies, Denzil (Llanelly)


Atkinson, Norman
Carmichael, Neil
Davies, S. O. (Merthyr Tydvil)


Bagier, Gordon A. T.
Carter-Jones, Lewis (Eccles)
Davis, Clinton (Hackney, C.)


Barnett, Joel
Castle, Rt. Hn. Barbara
Davis, Terry (Bromsgrove)


Beaney, Alan
Clark, David (Colne Valley)
de Freitas, Rt. Hn. Sir Geoffrey


Bennett, James (Glasgow, Bridgeton)
Cocks, Michael (Bristol, S.)
Dempsey, James


Blenkinsop, Arthur
Cohen, Stanley
Doig, Peter


Boardman, H. (Leigh)
Coleman, Donald
Douglas-Mann, Bruce


Booth, Albert
Concannon, J. D.
Driberg, Tom







Duffy, A. E. P.
Kinnock, Neil
Pendry, Tom


Dunnett, Jack
Latham, Arthur
Pentland, Norman


Eadie, Alex
Lawson, George
Price, J. T. (Westhoughton)


Edwards, Robert (Bilston)
Leadbitter, Ted
Price, William (Rugby)


Evans, Fred
Lee, Rt. Hn. Frederick
Probert, Arthur


Fernyhough, Rt. Hn. E.
Lestor, Miss Joan
Rees, Merlyn (Leeds, S.)


Fisher, Mrs. Doris (B'ham, Ladywood)
Lomas, Kenneth
Richard, Ivor


Fletcher, Ted (Darlington)
Loughlin, Charles
Roberts, Albert (Normanton)


Foley, Maurice
Lyons, Edward (Bradford, E.)
Roberts, Rt. Hn. Goronwy (Caernarvon)


Ford, Ben
Mabon, Dr. J. Dickson
Rodgers, William (Stockton-on-Tees)


Forrester, John
McBrdie, Neil
Roper, John


Fraser, John (Norwood)
McCann, John
Rose, Paul B.


Freeson, Reginald
McCartney, Hugh
Ross, Rt. Hn. William (Kilmarnock)


Galpern, Sir Myer
McGuire, Michael
Sandelson, Neville


Gilbert, Dr. John
Mackenzie, Gregor
Sheldon, Robert (Ashton-under-Lyne)


Ginsburg, David
Mackie, John
Silkin, Rt. Hn. John (Deptford)


Golding, John
Maclennan, Robert
Silkin, Hn. S. C. (Dulwich)


Gordon Walker, Rt. Hn. P. C.
McMillan, Tom (Glasgow, C.)
Skinner, Dennis


Gourlay, Harry
McNamara, J. Kevin
Small, William


Grant, George (Morpeth)
Mahon, Simon (Bootle)
Smith, John (Lanarkshire, N.)


Griffiths, Eddie (Brightside)
Mallalieu, J. P. W. (Huddersfield, E.)
Stallard, A. W.


Hamilton, James (Bothwell)
Marks, Kenneth
Steel, David


Hamilton, William (Fife, W.)
Marquand, David
Stewart, Donald (Western Isles)


Harman, William (G'gow, Maryhill)
Marsden, F.
Stewart, Rt. Hn. Michael (Fulham)


Hardy, Peter
Marshall, Dr. Edmund
Stoddart, David (Swindon)


Harrison, Walter (Wakefield)
Meacher, Michael
Strang, Gavin


Heffer, Eric S.
Mellish, Rt. Hn. Robert
Summerskill, Hn. Dr. Shirley


Hooson, Emlyn
Mendelson, John
Taverne, Dick


Horam, John
Millan, Bruce
Thomas, Rt. Hn. George (Cardiff, W.)


Huckfield, Leslie
Miller, Dr. M. S.
Tinn, James


Hughes, Rt. Hn. Cledwyn (Anglesey)
Milne, Edward (Blyth)
Torney, Tom


Hughes, Robert (Aberdeen, N.)
Mitchell, R. C. (S'hampton, lichen)
Urwin, T. W.


Hughes, Roy (Newport)
Morgan, Elystan (Cardiganshire)
Varley, Eric G.


Hunter, Adam
Morris, Alfred (Wythenshawe)
Walker, Harold (Doncaster)


Irvine, Rt. Hn. Sir Arthur (EdgeHill)
Morris, Charles R. (Openshaw)
Watkins, David


Janner, Greville
Morris, Rt. Hn. John (Aberavon)
Weitzman, David


Jay, Rt. Hn. Douglas
Moyle, Roland
White, James (Glasgow, Pollok)


Jeger, Mrs. Lena (H'b'n amp; St. P'cras, S.)
Murray, Ronald King
Whitehead, Phillip


Jenkins, Rt. Hn. Roy (Stechford)
O'Halloran, Michael
Willey, Rt. Hn. Frederick


John, Brynmor
O'Malley, Brian
Williams, Mrs. Shirley (Hitchin)


Johnson, James (K'ton-on-Hull, W.)
Oram, Bert
Wilson, Rt. Ht. Harold (Huyton)


Johnson, Walter (Derby, S.)
Oswald, Thomas
Wilson, William (Coventry, S.)


Jones, Barry (Flint, E.)
Owen, Dr. David (Plymouth, Sutton)
Woof, Robert


Jones, Dan (Burnley)
Paget, n. T,



Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Parker, John (Dagenham)
TELLERS FOR THE NOES:


Jones Gwynoro (Carmarthen)
Parry, Robert (Liverpool, Exchange)
Mr. James Dunn and


Jones, T. Alec (Rhondda, W.)
Pavitt, Laurie
Mr. Ernest Perry


Kaufman, Gerald

Bill accordingly read the Third time, and passed.

CHILDREN (ACCIDENTAL POISONING)

Motion made, and Question proposed. That this House do now adjourn.—[Mr. Humphrey Atkins.]

10.27 p.m.

Mr. Greville Janner: I am happy to have the opportunity to draw to the attention of the House the monstrous and quite unnecessary suffering caused through the accidental poisoning of children. The problem is a very large one indeed. It is estimated that this year some 25,000 children will find their way into hospital suffering from accidental poisoning. This is nothing more than the tip of the poisoned iceberg. There are also thousands more children who are treated by their general practitioners or indeed by their parents.
The worst aspect of the problem is that it is so very unnecessary and its causes are obvious. The first cause is carelessness—carelessness on the part of the parents, and also on the part of those who welcome small children to their homes and who forget that anything that is available is likely to be popped into the mouth of a child under the age of five and to cause harm.
The figures for Leicester are quite shocking. Already this year some 139 children have been admitted to Leicester hospitals, mainly to the Leicester Royal Infirmary, suffering from poisoning, as opposed to 145 for the whole of last year. In other words, the figure appears nearly to have doubled.
The information provided by the Minister to my hon. Friend the Member for Liverpool, West Derby (Mr. Ogden), shows that the figures have increased every year—17,171 in 1966; 20,616 in 1967; 23,409 in 1968. The increase shows in all types of poisoning, but medicinal poisoning is the most important and severe. In 1968, of 20,285 children under the age of five who were accidentally poisoned, nearly 14,000 cases resulted from the adverse effects of medicinal agencies.
The other cause of this poisoning has been the unhappy lack of Government action—and I do not attack the present Administration any more than past Ad-

ministrations. This problem has been ignored by all Governments. A great deal can be done by parents, by health visitors and especially by the Government.
First, parents must learn to keep out of the reach of children not only pills and potions, not only those pills that they regard as dangerous—tranquillisers, antidepressants and the like—but also common pills like aspirin. Even more important, because this is so little known, they must keep out of the way of children products which have caused a considerable number of poisonings in the past year—paraffin, nail varnish remover, turpentine, travel sickness pills, toilet cleaners, Brasso, bleach, weed killers, ant killers, caustic soda and anti-freeze. Even ordinary detergents can cause grave harm to a child who drinks them. Parents do not take care to keep these substances away from their children. In general there is no indication on the canister, the box or the container that these articles are capable of poisoning.
I hope that it will not be said that the reason is that only perhaps 50 or 100 children die as a result of these poisons. That is still a considerable number; if the debate saves only one life it will have been worth while.
A considerable number of children are injured as a result of the poisoning and no one knows how many children there are with damaged kidneys and livers and, in certain cases, whose mental capacities have been damaged. These children must be considered. This is not just a question of cost.
Last Christmas, when I visited a hospital in Leicester, I saw a child come in with his parents after having taken an overdose of aspirin. Terror and anxiety had been caused to the parents, although the child did not know much about it. One only hopes and prays that he has returned to excellent health. No doubt he has, because he was detained for only a short time.
I understand that the majority of poisoned children are detained in hospital for only a day or two, but a number stay much longer. It depends on the nature and quantity of the poison. They stay in at great cost—not just in money but above all in suffering. This matter should be treated very seriously. Parents


must learn that, when they bring the shopping home they must put the dangerous items out of reach.
Health visitors do a marvellous job, but the Minister might issue a circular advising them to keep an eye on the medicine bottles in the houses they visit and to advise people to make proper use of high cupboards and locked cupboards. They should help to keep an eye, along with the rest of us, on such toxic, dangerous and everyday items as common garden weed killers which are all too often left lying around on the table in the shed. They should be kept out of the reach of children at all times.
What can the Government do about this? First, through the Health Council or some other organisation or body, they should initiate a publicity campaign to draw these matters to the attention of children, of their parents, of their hosts, and of schools, but not in the way which is all to often adopted at the moment and which simply suggests to people that others are careless but not they themselves. Situations should be drawn to their attention. For example, thousands of people use empty soft drink bottles as containers for turpentine and other poisons. A child thinks that any liquid in such a bottle is a soft drink, and he swallows it. This practice is an act of gross stupidity, and people do not realise what they are doing. Kindly, good people are accidental poisoners, and they should be taught. The Government should initiate a campaign which effects that teaching.
Secondly, the Government should make it impossible for any more medicines or pills, which are the major source of poisoning, to be put on the market other than in child-proof containers. I understand that legislation is not necessary, so that I can raise this aspect of the matter in this debate. However, if the answer that I receive is not satisfactory, I am glad to say that I shall have an opportunity next week to ask leave to introduce legislation dealing specifically with this point.
The answers which my hon. Friend the Member for West Derby, and I have received to Parliamentary Questions indicate that the Government are not satisfied with these containers. At this hour, I shall not produce the large number of containers that I have in my

possession, but, if I did, I hope that hon. Members would not succeed in opening them. The more expensive of them might well prove to be unopenable without strict instructions.
A child under five years of age should not have available medicines or pills in containers which he can open with one hand or, even worse, which will come apart or open in his mother's bag, the pills falling out and the child thinking that they are a well-known brand of chocolate bean. Young children believe them to be sweets. It is not their fault.
Very often, parents cannot buy safe containers from chemists. Even if they are prepared to pay extra, the containers are not available. I am glad to say that some are coming on to the market, some highly-priced and others very cheap, so that people will be able to buy them if they wish. At the moment, they are not available. They should not only be made available; their use should be made compulsory. Even if they are not perfect, they are a great deal better than the containers that people have to put up with at the moment.
According to the Department, the cost is likely to be about £500,000 a year. Assuming that 25,000 children reach hospitals and each of them spends two days there, adding to that the cost of ambulances and nursing, and leaving out of account the cost in human suffering, one still makes a national profit as a result of spending £500,000. If one takes into account the time that parents are off work because they are looking after their children when they leave hospital, an expenditure of £500,000 is very small.
If it means saving the lives of 25 children, if it prevents 1,000 children from being permanently physically or mentally injured, if it spares 50,000 parents day's and nights of misery worrying about their children, in the context of the national economy or in the context of the National Health Service, £500,000 is a small price to pay.
I hope that, in the circumstances, the Minister will indicate when he replies that he will change his mind and introduce regulations under the Medicines Act which would make it compulsory that child-proof containers, perhaps of varying designs, should be introduced and should be provided. Even if he is not prepared to do that, I hope that he will at least


take such steps as are in his power to ensure that containers of this sort are made available to all chemists at all times and that where medicines are not sold in such containers and are dangerous, they will be sold otherwise in approved forms of sealed plastic strips or other dispensers which cannot be torn apart by small children and which cannot cause the sort of danger and damage which drugs are causing to so many children.
If we have a combined publicity drive from the Government, a new awareness from parents, teachers and grandparents and all those who love children and look after them of the dangers not only of pills and medicines, but of common household substances which should be kept out of the reach of children; if we also take the ordinary measures to make it more difficult for people to be careless—nothing will make it impossible, but we can make it more difficult and help people to keep their own children alive—the Minister will have made a significant contribution, and one which he and the Government can make at minimal expense. I hope that in that event he would have the support of hon. Members on all sides of the House.

10.42 p.m.

The Under-Secretary of State for Health and Social Security (Mr. Michael Alison): I can readily understand the concern for the safety of young children expressed by the hon. and learned Member for Leicester, North-West (Mr. Greville Janner). I assure him not only that I am quite certain that the whole House shares his concern but that I particularly and personally share it, because I fall into the category of those who indirectly have suffered in this way. At the age of 2½ my own little girl, now aged seven, opened her grandmother's handbag and extracted a packet of seasickness-pills. She swallowed half of them and had to be rapidly removed to hospital to have her stomach pumped. Luckily, she was all right and she returned home quickly. That illustrates my background of considerable personal sympathy towards the question raised tonight by the hon. and learned Member.
The problem is not, however, a straightforward one which admits of clearcut, simple and straightforward solutions. As I indicated in my recent Written Answer

to the hon. Member for Liverpool, West Derby (Mr. Ogden), which the hon. and learned Member may have seen, some of the figures, for example, of deaths quoted in some sections of the Press have exaggerated the scale of the problem.
In default of further information on the incidence of poisoning, we tend to look to hospital admissions as the only certain guide, but these, again, tell only part of the story. In the first place, they reflect the changing attitudes of parents and doctors to the need for a hospital check as much as the actual numbers of poisonings.
Well over two-thirds of all children under the age of five who are admitted to hospital because of poisoning, or suspected or possible poisoning, are discharged within 48 hours. The steady increase in the numbers of admissions to hospital thus shows a growing awareness of the dangers whenever there is even the risk of poisoning.
Among the things that we need to know—and we are taking steps to find these things out in departmental sample surveys—are the extent of serious injury, the precise form in which the various drugs were taken in or ingested by the children concerned, whether any drugs concerned were prescribed items or bought over the counter as household remedies and, in general, the circumstances in which poisoning or suspected poisoning incidents occur. These things we are studying and investigating.
Although accidental poisoning accounts for only a small fraction—under 2 per cent.—of all accidental deaths of young children, however, we entirely agree with the point made by the hon. and learned Member that even one death is a disaster and that life should, if possible, be saved. What is a good deal less clear is how best it could, and should, be protected. This does not mean that we are declining to act until someone comes up with a 100 per cent. watertight, complete answer, because I am far from sure that there is likely to be a full and foolproof perfect solution, although we shall certainly continue to examine each remedy which is suggested. It would, however, be wrong for the Government to be hustled into taking ineffective or largely wasteful action out of, as it were, panic sympathies.
It has been claimed that whilst we have been identifying the problem at home, authorities elsewhere have acted. There has, for example, been recent legislation in the United States, though the powers taken there are essentially no wider than those conferred in this country by Sections 85 and 87 of the Medicines Act. And I understand that no regulations have as yet been made in America. Certainly there have been reports of trials of various kinds, but on a small scale compared with the size of the National Health Service market.
We have considered all the evidence so far available, and I am bound to tell the hon. and learned Gentleman that I remain unconvinced either that industry should be urged to use particular types of packaging or that the extent to which various containers are claimed to be child resistant would be likely to reduce poisonings would justify the diversion of, on present estimates, at least £500,000 of scarce National Health Service resources from the treatment of patients.

Dr. Gerard Vaughan: Would the £500,000 to which my hon. Friend has referred be extra to the present cost of containers? If not, that figure would have to be set against the present cost. My hon. Friend might like to consider carrying out a trial in some part of the country to see what effect the introduction of this kind of container would have on the number of accidents amongst children, because this is a very serious problem.

Mr. Alison: Perhaps I could go on to refer to the trials that have taken place. The £500,000 that I have mentioned would be additional. I think that it would involve extra cost to introduce a particular kind of safety container for children.
Coming to the idea of experiments and trials to find a particular kind of container, I think it may be of interest to the House to know what has been done in this respect. In a trial carried out in Australia, about 40 per cent. of children aged 4½ were able to open a child-resistant container within five minutes, and the average lime taken with constant urging to open 10 tablets in foil-strip was eight minutes, so I think that we must not underestimate the ingenuity of even the youngest children in reacting to

the challenge presented by an intriguing container which at first defies attempts to open it. They are extremely clever with their little fingers, as most parents know, in getting round devices which are meant to defeat them.
General matters of home safety are, of course, for my right hon. Friend the Home Secretary, but he has advised me that domestic bleaches—and I think that the hon. and learned Member originally had in mind some of the hazards arising from domestic bleaches—are not regarded by his medical advisers as a major toxic hazard, and as far as can be judged from the available information are not often concerned in child poisoning cases. In 1970, for example, out of 12,224 poisoning cases know to the Poisons Information Service, 183 were due to bleach—five adults, and 178 children. Most of the children were aged between one and 2½ years. None died, and the great majority were discharged from hospital after 24 hours.
Following a recommendation made by the Home Office in 1966, manufacturers are voluntarily labelling bleaches to the effect that they should not be mixed with other substances, in view of the risk of the generation of chlorine gas if this is done. In addition, there are warnings to avoid accidents, and advice on the action to be taken should one occur.
As a result of another approach from the Home Office, there is also a longstanding agreement among bleach manufacturers that bleaches shall not be marketed in containers likely to be associated by the public with food and drink. Bottles of bleach should already be appropriately labelled and packaged, therefore, but if this is shown not to be the case in respect of any particular brand, the Home Office will gladly take up the matter with the manufacturer concerned. I have no doubt that the hon. and learned Gentleman would draw to my attention any particular case that he can.
It is often suggested that all household substances, including bleach, should be subject to a statutory labelling requirement. Particularly harmful products are already required by law to bear warning labels of some kind. These controls do not apply to bleaches most of which are based on sodium hypochlorite, not itself a listed poison.
The hon. Gentleman mentioned pesticides. The Ministry of Agriculture, Fisheries and Food administers what we know as the Pesticides Safety Precautions Scheme, with the help of the Advisory Committee on Pesticides and other Toxic Chemicals. All pesticides cleared under the scheme on sale in this country are labelled by the manufacturers with appropriate warnings and instructions.
As regards the general run of other household products with their varying degrees of toxicity and potential risk there are still difficulties in deciding which of these products should be labelled with a warning of some kind. If every product which might conceivably cause harm to a child were required to bear a warning of some kind, it would probably mean that a very large number of substances in use in the home would have to bear a warning. Any such proliferation of warning labels would ultimately defeat its own ends, as the warnings would tend to lose their impact. If, on the other hand, it was decided to confine the warnings to a selected range of products, chosen because of their toxicity or the frequency with which they were involved in accidental poisonings, there is a possibility that the public might be encouraged to assume that the other products which bore no warning label were completely harmless. The Pharmaceutical Society has pointed out that similar difficulties could apply to the provision of safety containers for medicines unless these were provided across the board; even the comparatively safe analgesics freely available for purchase may be lethal for the young children at risk if taken in quantity. Even with drugs in such containers there could be a false sense of security if they were left in accessible places or the closure was not secure.
Unfortunately, some people just fail to read warning labels, however prominent, and their value can also be lost if harmful substances used in the home are stored in containers other than those in which they are supplied by the manufacturers, or when industrial compounds such as cleaning fluids or concentrated weed-killers which are not normally on sale to the public are brought into the home. Containers such as soft drink bottles, specified by the hon. and learned Gentleman, are often used for the storage of these harmful liquids, the

bottles being unlabelled or, even worse, still bearing their original soft drink labels. This creates a particularly dangerous situation.
In these circumstances, the Government are concerned to promote publicity designed to ensure that all household substances likely to cause harm are kept in a safe place out of the reach of children. The hon. and learned Gentleman touched on the need for publicity of that kind. The Home Office, for example, have made television-filler films on this subject which are shown quite often by the B.B.C. and Independent Television companies in breaks between programmes. The Royal Society for the Prevention of Accidents promotes frequent national campaigns covering various aspects of safety in the home and these usually include advice on the prevention of poisoning accidents. In addition, the Society produces and stocks a wide range of publicity material including posters and leaflets about accidental poisoning. These are made available to local authorities and local home safety committees throughout the country for use in local home safety campaigns. We understand that very good use is made of the material thus supplied.
Regarding the labelling of medicines, I have explained that there are already powers in the Medicines Act, although I regard this as being largely for the professions and a matter which they take most seriously. Inasmuch as labelling has an educative rôle, responsibility lies with the Health Education Council; but there is one recent professional development to which I should refer. The agreement between the medical and pharmaceutical professions that the medicine dispensed will be identified on the label of the container unless the prescriber indicates to the contrary may not prevent accidental poisoning, but it is likely to assist the speedy and effective treatment of some cases of poisoning. We have, therefore, welcomed the agreement and my Department is studying the implications for the National Health Service of implementing it.
Particularly in respect of medicines, we await the conclusions of researches which may throw up some fundamental pointers to the basic facts and problems involved and specifically to the comparative value of education and packaging.
But I must stress that we continue to look at all the evidence, from whatever source it comes, either home or abroad, and that we appreciate and welcome the concern that has been expressed tonight. This debate has served an important purpose in drawing attention to the real and tragic hazards involved in allowing young children access to dangerous substances.
What we have been talking about in the main have been possible second and third lines of defence; and I hope that nothing which has been said will detract from what I believe to be the first line—or discourage the professional, local government, and voluntary bodies and, incidentally, the manufacturers of proprietary medicines, from continuing to advocate it—namely, the golden rule "Keep all medicines out of the reach of children".
I hope that parents and all who are in touch with young children will recognise the need for constant vigilance in this respect. As a result of all that is being done both nationally and locally, we trust that they will become increasingly aware of the need to keep other household substances, such as bleach, safely out of children's reach.
Young children are active, lively and curious, and it is for the rest of us to recognise this and see that they remain safe. In many ways I think we do. The bodies I have mentioned and parents themselves must be entitled to take credit for the fact that children's deaths from poisonings in this country seem to be low compared with some other developed countries.
I trust we shall keep it that way; and my Department will continue to review

what more can and ought to be done in consultation with those organisations, including in particular the Health Education Council, concerned with home safety and other bodies representative of the pharmaceutical profession and industry.

Mr. Greville Janner: The hon. Gentleman will be aware of the considerable increase in the number of poisonings in this country over the years. What steps does he propose to take to deal with this matter? One naturally agrees with all he says about the first line, but he is in charge of the second and third lines. What is he doing about them?

Mr. Alison: I referred at the beginning of my remarks to the departmental pilot survey, which is in hand, into the real figures which lie behind the number of hospital admissions, many of which are ostensibly poisonings but in the event prove not to be. There are many facts that we do not know and the sort of figures which the hon. and learned Gentleman quoted prove to be very generalised and do not give a full insight into the size of the problem. Many of the facts and figures which are given are often substantially exaggerated. If the hon. Gentleman will read in the OFFICIAL REPORT the list of steps that are being taken, the number of bodies concerned with this matter and the various alternatives that are available—

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at three minutes to Eleven o'clock.